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TARIFFS, RECIPROCITY AND FOREIGN TRADE 



THE ANNALS 



OF THE 

American Academy of Political and Social Science 

w 

ISSUED BI-MONTHLY 

VOL. XXIX, No. 3 MAY, 1907 

Editor: EMORY R. JOHNSON 

Associate Editors : L. S. Rowe, Samuel McCune Lindsay, Carl Kelsey, 

James T. Young, Chester Lloyd Jones, Ward W. Pierson. 



CONTENTS 

PACE 

DEVELOPMENT OF THE FOREIGN TRADE OF THE 

UNITED STATES Elihu Root i 

RECIPROCITY WITH CONTINENTAL EUROPE Alvin H. Sanders 10 

A BRIEF HISTORY OF THE RECIPROCITY POLICY, 

William Eleroy Curtis 16 

RECIPROCITY AND THE MIDDLE WEST D. M. Parry 22 

RECIPROCITY AND ITS RELATION TO FOREIGN TRADE, G. L Duval 26 
WHAT AMERICANS MUST DO TO MAKE AN EXPORT 

B U SIN ESS James W. J r an Cleave 30 

THE DOUBLE TARIFF SYSTEM N. I. Stone 38 

TARIFF PROVISIONS FOR PROMOTION OF FOREIGN 

TRADE OF THE UNITED STATES G. C7. Hucbncr 58 

AMERICAN MANUFACTURES AND FOREIGN MARKETS, 

Eugene A r . Foss 75 
THE TARIFF AND THE PRICE OF AGRICULTURAL 

MACHINES Charles Deering 82 

OUR TARIFF IN ITS RELATION TO THE GRAIN TRADE, Louis Midler 88 
THE TARIFF AND OUR FOREIGN TRADE IN MEATS, 

J. Ogden Armour 97 
THE TARIFF AND OUR FOREIGN TRADE IN ELECTRICAL 

APPARA TUS Maurice Coster 102 

THE LEATHER INDUSTRY AND THE TARIFF A. Augustus Healy 113 

THE TARIFF AND THE LUMBER TRADE W. B. Mcrshon 116 



PHILADELPHIA 
American Academy of Political and Social Science 

36th and Woodland Avenue 
1007. 



(i> 



*<v 



V 



DEVELOPMENT OF THE FOREIGN TRADE OF THE 
UNITED STATES 1 



By Hon. Elihu Root, 

Secretary of State, Washington, D. C. 



We are advancing, the whole world is advancing, in the oppor- 
tunities and in the spirit which create opportunities for that kind of 
commerce which is profitable and beneficial to both parties the world 
over. Our relations continually grow more sensible and kindly with 
all the powers of Europe, with our vigorous and growing neighbor 
to the north, with our rapidly advancing and developing neighbors to 
the south, and with the nations that face us on the other side of 
the Pacific. Little occasions for controversy, little causes for irri- 
tation, little incidents of conflicting interests continually arise, as 
they do among friends and neighbors in the same town, but the 
general trend of international relations is a trend towards mutual 
respect, mutual consideration and good understanding. 

Of course, our relations to Europe, to the Orient and to Canada 
have long been much discussed and .are worthy of discussion ; but 
it seems to me that the subject which at this particular time opens 
before us with more of the appearance of new opportunity than any 
other is the subject of our relations to the Latin-American nations 
to the south. Just at the time when the L T nited States has reached 
a point of development in its wonderful resources and accumulation 
of capital so that it .is possible for us to turn our attention from our 
own internal affairs, to reach out into other lands for investment, 
the great and fertile and immeasurably rich countries of South 
America are emerging from the conditions of internal warfare, of 
continual revolution, of disturbed and unsafe property conditions, 
and are acquiring stability in government, safety for property, 
capacity to protect enterprise. So that we may look with certainty 
to an enormous increase of population and of wealth throughout 
the continent of South America, and we may look with certainty 
for an enormous increase in purchasing power as a consequence 
of that increase in population and wealth. 

*An address delivered before the Convention for the Extension of Foreign Commerce 
held at Washington, D. C, January 14-16, 1907. 

(440 



2 The Annals of the American Academy 

These two things coining together spread before us an oppor- 
tunity for our trade and our enterprise surpassed by none anywhere 
in the world or at any time in our history. It was with this view 
that last summer I spent three months, in response to the kind 
invitations of various governments of South America, in visiting 
their capitals, in meeting their leading men, in becoming familiar 
with their conditions and in trying to represent to them what I 
believe to be the real relation of respect and kindliness on the part 
of the people of the United States. 

I wish you all could have seen with what genuine reciprocal 
friendship they accepted the message that I brought to them. We 
have long been allied to them by political sentiment. Now lies before 
us the opportunity, with their stable governments and protection for 
enterprise and property, and our increased capital, to be allied to 
them also by the bonds of personal intercourse and profitable trade. 
This situation is accentuated by the fact that we are turning our 
attention to the south and engaging there in the great enterprise 
of constructing the Panama Canal. No one can tell what effect 
that will have upon the commerce of the world, but we do know 
that there never has been in history a case of a great change in 
the trade routes of the world which has not powerfully affected 
the rise and fall of nations, the development of commerce and the 
development of civilization. 

We, by the expenditure of a part of our recently acquired 
capital, are about to open a new trade route that will bring our 
Atlantic and Gulf ports into immediate, close intercourse with all 
the Pacific coasts of South and Central America, and which will 
bring our Pacific ports into immediate and close relation with all 
the countries about the Caribbean Sea and the eastern coast of 
South America. The combination of political sentiment which has 
long allied us with the Latin-American countries, the opportunity 
which comes from their change of conditions and our increase of 
capital and the effects that must necessarily follow the opening of 
the great trade route of the Panama Canal all point to the develop- 
ment of American enterprise and American trade to the south. 

Now in considering that view of the future there are certain 
practical considerations that necessarily arise. TTow are we to 
adapt ourselves to this new condition? How are we to utilize this 
opportunity? One subject naturally presents itself, and that is 

(442) 



The Foreign Trade of the United States 3 

the increase of means of communication through which our inter- 
course and our trade may be carried on. And that may be in two 
ways, one by the promotion of the railroad, long ago projected, 
and in constant course of development, the road that we speak 
of as the Pan-American Railroad. When we speak of the Pan- 
American Railroad we are speaking of something of the future and 
which exists to-day only in a great number of links, each of which 
his its separate name. They are being built and being built with 
great rapidity. In Mexico, in Guatemala, in Bolivia, in Peru, in 
the Argentine, in other countries pieces of road are being built, 
many of them by American capital and American enterprise, some 
of them by capital coming from other countries, promoted by the 
strong desire of the people of these Latin-American countries to 
break out from their isolation and to be brought into contact with 
the rest of the world. When the work actually under contract is 
completed, there will be less than 4,000 miles remaining to be built 
to make a complete railroad, which will unite the City of Wash- 
ington with the City of Buenos Ayres in the Argentine. 

One of the objects of the Rio Conference last summer was to 
promote and further the interests of all American countries in the 
building of this road, and I am glad to believe that the action taken 
by that conference has had that effect. The line now running to 
the south is almost through Mexico, has almost reached the Guate- 
mala line, and within the life of men now sitting in this room it 
will be possible for passengers and merchandise to travel by rail 
practically the entire length of both the North and South American 
continents. 

The other method of communication is that by steamships. 
In this we are lamentably deficient. A great many fine, swift, 
commodious lines of steamships run between the South American 
ports and Europe and very few and comparatively poor ships run 
between those ports and the ports of the United States. No Amer- 
ican line runs south of the Caribbean Sea. Our mails are slow 
and uncertain. It is a matter of hardship for a passenger to go 
directly between the great South American ports and the great 
North American ports, while the mails runs swiftly and certainly 
to and from Europe, and it is a pleasure for a passenger to go 
between one of those ports and the European ports. The Post- 
master General reports that the best way for him to get the de- 

(443) 



4 The Annals of the American Academy 

spatches from my department to our Ministers in South America 
with certainty and swiftness is to send them to Europe and have 
them sent from there to South America. That condition of things 
ought not to continue if we can prevent it. 

One great reason why it exists is that American shipping is 
driven off the seas by two great obstacles interposed in its way by 
legislation. One is the legislation of foreign countries which has 
subsidized foreign shipping; the other is the legislation of our own 
country, which by the protective tariff has raised the standard of 
living of all Americans — a most beneficent result — so that Amer- 
ican ships paying and feeding their officers and men according to 
the American standard cannot compete on even terms with foreign 
ships, the cost of whose officers and men is under the foreign 
standard. 

If our government will equalize these artificial disadvantages 
under which our vessels labor and will do for them enough to make 
up the disadvantage caused by raising the standard of living of the 
men they employ, and the disadvantage coming from the fact that 
their foreign competitors are subsidized, we will have an American 
merchant marine and American ships to carry passengers and 
freight and mails between South and North American ports. I 
hope that all of you who agree with me, believing that our gov- 
ernment ought to be fair to the American merchant marine, will 
say so out loud, say so to your neighbor, say so in such a way that 
American public opinion will realize that that kind of fair treatment 
is a matter of broad, American public policy. 

There is one other subject — very important as a part of this 
general outlook and forecast of American policy towards the south. 
That is our special relation towards the smaller countries about 
the Caribbean, and particularly the West Indian, countries, the 
islands that lie directly on the route between our ports and the 
Panama Canal. Some of them have had a pretty hard time. The 
conditions of life in them have been such that it has been difficult 
for them to maintain stable and orderly governments. They have 
been cursed, some of them, by frequent revolution. Poor Cuba, 
with her wonderful climate and richness of soil, has suffered. We 
have done the best that we could to help her, and we mean to go on 
doing the best that we can to help her. 

(444) 



The Foreign Trade of the United States 5 

I think the key of our attitude towards these countries can be 
put in three sentences: 

(1) We do not want to take them for Ourselves; 

(2) We do not want any foreign nations to take them for 
themselves ; 

(3) We want to help them. 

Now, we can help them, help them govern themselves, help 
them to acquire capacity for self-government, help them along the 
road that Brazil and the Argentine and Chile and Peru and a 
number of other South American countries have traveled — up, out 
of the discord and turmoil of continual revolution into a general 
public sense of justice and determination to maintain order. There 
is a good deal of talk about the annexation of Cuba in the news- 
papers. Never, so long as the people of Cuba do not themselves 
give up the effort to govern themselves. Our efforts should be 
towards helping them to be self-governing. That is what we are 
trying to do now, and what we mean to try to do. 

So with Santo Domingo. Poor Santo Domingo ! With her 
phenomenal richness of soil, her people ought to be among the 
richest and happiest on earth ; but that island has been the scene of 
almost continual revolution and bloodshed. Her politics are purely 
personal, a continual struggle of this and that and the other man 
to secure ascendency and power. She has come to us for help. 
She is burdened with an enormous debt, much of it fraudulent, 
much of it created by revolutionary governments in the bush or 
by regular governments in the capital, which, to save themselves 
from being overthrown, have been ready to make any sort of 
bargain, to pay any sort of interest, to promise anything to get 
immediate relief. Many debts have been created in that way and 
are hanging over the republic like a fog. For the payment of these 
foreign debts she has pledged the resources of this custom house 
to creditors from this country, and of that custom house to cred- 
itors from that country, and of another custom house to creditors 
from a third country. With this enormous debt hanging over her 
like a pall, and with this record of continual revolution and strife 
depriving her of credit, depriving her of courage and of hope, she 
came to us to help her. And we are trying to arrange so that she 
may have the moral support of the United States, which is neces- 
sary to settle her debts, to insure the honest collection of her 

(445) 



6 The Annals of the American Academy 

revenue and its application to carry out the settlemen of her debts. 
We are trying to make an arrangement of that kind by a treaty, 
trying to perform the office of friendship and discharge the duty 
of good neighborhood towards Santo Domingo. Our treatment 
of Santo Domingo, like our treatment of Cuba, is but a part of 
a great policy which shall in the years to come determine the rela- 
tions of this vast country, with its wealth and enterprise, to the 
millions of men and women and the countless millions of trade 
and treasure of the great world to the south. Our treatment of 
Santo Domingo, like our treatment of Cuba, is but a part of the 
working out of the policy of peace and righteousness as the basis 
for wealth and prosperity, in place of the policy of force, of 
plunder, of conquest, as the means of acquiring wealth. 

The question is frequently asked should not a series of reci- 
procity treaties be adopted for the purpose of promoting our rela* 
tions with these southern countries? That is not so important in 
regard to the South American countries as it might at first seem, 
because so greatly do the productions of North and South America 
vary that most of the products of South America already come into 
the United States free, because they are not competing with our 
products. Between eighty and ninety per cent of all our imports 
from South America are now admitted to the United States free 
of duty. Over ninety per cent of all our imports from the great 
country of Brazil come in free of duty. So that the field to be 
covered by reciprocity treaties with those countries is comparatively 
narrow. There are, however, some countries in regard to whose 
products I should like very much to see an opportunity to make 
reciprocity treaties. 

But this opens up a broader subject. I do not think that the 
subject of reciprocity can now be adequately considered or dis- 
cussed without going into that broader subject, the whole form of 
our tariff laws. 

In my judgment, the United States must come to a maximum 
and minimum tariff. A single straightout tariff was all very well 
in the world of single straightout tariffs, but we have passed on 
during the course of years into a world for the most part of maxi- 
mum and minimum tariffs, and with our single rate tariff we are 
left with very little opportunity to reciprocate good treatment from 
other countries and very little opportunity to defend ourselves 

(446) 



The Foreign Trade of the United States J 

against bad treatment. Any country in the world can put up its 
tariff against our products, as compared with similar products from 
another country, without suffering for it so far as our present laws 
are concerned. We go on taking that country's products at just 
the same rates as we did before. Any country in the world knows 
that if it puts down our products in its tariff it will get no benefit 
from it, because we will have to charge it the same rates that we 
charge the country which treats us the worst. The maximum and 
minimum tariff would be free from one serious difficulty that arises 
in the negotiation of reciprocity treaties. That difficulty is this : 
When you make a reciprocity treaty with country A, agreeing to 
receive certain products from that country at less than our tariff 
schedule, you are immediately confronted by country B, which is 
equally friendly to us, treats us equally well, or perhaps better, and 
to which we cannot with good grace refuse the same. Then comes 
country C with the same demand, and D and E. The result is 
that, with that fair and equal treatment which we wish to accord to 
all countries, there is a tendency by means of successive reciprocity 
treaties to change the whole form of the tariff, and to change it 
without that deliberate consideration of the effect upon all American 
interests which ought to be given in dealing with this complicated 
and interwoven business of tariff rates. Now, a maximum and 
minimum tariff would enable us to deal equally with all countries, 
as we are friendly and ought to be friendly with all countries. 
It would be free from invidious discrimination, it would enable us 
to protect ourselves against those that use us badly, to reward those 
that use us well, and it would proceed upon a general and intelli- 
gent consideration of all interests. 

There is but one other subject that I want to speak to you 
about, one to which the convention which met here last year con- 
tributed very much, our representation abroad under the American 
consular system. 

The American consular service I had the honor to say here 
last year has been an exceedingly uneven one. There have been 
many very good men in it and there have been many men in it 
who were simply passing the remainder of their clays in dignified 
retirement. That condition came naturally enough when we did 
not have much foreign trade and we were not pushing ahead for 
it, but the strain on that machinery has of late years become great. 

(447) 



8 The Annals of the American Academy 

We are pushing out in all the world for trade, and our people want 
information, some of them need it, all want it, and they want to be 
well represented among the people of the other countries in which 
they want to do business. And wherever there is a weak spot there 
is trouble and dissatisfaction. So that with changing times a change 
in method has become necessary. 

Congress passed a law at the last session the material parts of 
which have been repeatedly brought up for consideration for over 
thirteen years. It was introduced years ago by men with foresight 
a little in advance of the practical requirements of the time. Their 
ideas did not receive endorsement and practical effect until the last 
session. Congress in the law then passed classified the consulates in 
different grades. They provided an inspection service, so that 
now we have inspectors who have been selected from among the 
most able and efficient consuls and whose business it is to see what 
consuls are doing and whether they are doing anything, so that 
now the State Department will not be the last place where infor- 
mation is received about the misdeeds of a consul. They have 
made provision that all fees should be turned into the treasury and 
the sole compensation of consuls should be their salary, thus closing 
the door to temptation. 

They did in that act a number of very good things for the 
consular service. There was a clause in the bill originally which 
provided that all appointments to the higher positions in the service 
should be by promotion from the lower positions, and that all 
appointments to the lower positions should be upon examination. 
That was stricken out because it was considered that Congress had 
no constitutional right to limit the President in that way. There 
is a good deal to be said for that view, but it is equally true of 
appointments to the army and to the navy, yet there have stood 
upon the statute books of the United States for many years pro- 
visions regulating the promotion there, providing for the filling of 
higher grades in the army and the navy by promotion, and pro- 
viding for the appointment to the lower grades only upon a satis- 
factory examination. And those provisions, while doubtless the 
President could break over them with the consent of the Senate, 
nevertheless have constituted a kind of agreement between the 
President and the Senate, having the appointing power, and Con- 
gress, which creates the offices and appropriates the money to pay 

(448) 



The Foreign Trade of the United States 9 

them, as to how the offices are to be filled. I would like to see 
that kind of an agreement applied to the consular service, so that the 
method of selection could be settled, and permanently settled, as it 
has been in the army and the navy. 

Immediately after the passage of the Consular Reorganization 
Act, with that clause omitted, the President made an order, known 
as the order of June 27, 1906, in which he provided that all the 
upper grades should be filled by promotion, and that the lower 
grades should be filled only upon examination. The order also 
prescribed the method of the examination, and provided that, as 
between candidates of equal merit, the appointments should be made 
so as to equalize them throughout the United States, and should 
be made without regard to the political affiliations of the candidates. 
Under that order we will have the opportunity, in filling all of 
the important consulates, to get the best possible evidence as to 
whether a man is fit for the important place by scanning the work 
of the young men in the lower places — a method better than a 
dozen examinations and better than ten thousand letters of recom- 
mendation. 

Under that plan we will put in the young men who qualify for 
the lower grades of places and bar out the lazy fellows that want 
to fall back on a living they are not energetic enough to get for 
themselves. When we have seen how the young fellows work in 
the lower places, we will pick out the men here and there who are 
born consuls and put them into the higher places. Now, that is 
the law for this administration. It is good until the 4th of March, 
1909. What will become of it then no one can tell. I should be 
very glad if the public opinion of the country would say to Con- 
gress: Agree to this arrangement in such a way that it will be 
permanent for all time. 



RECIPROCITY WITH CONTINENTAL EUROPE 



By Alvin H. Sanders, 

Managing Editor The Breeder's Gazette and Chairman American 

Reciprocal Tariff League. 



Reciprocity with continental Europe, now looming up as one 
of the leading politico-economic questions of the day, is big with 
possibilities, because of the enormous wealth and buying power of 
the nations involved. It is, therefore, of vast importance to our 
people. France and Germany have a joint population of nearly 
100,000,000 and are both heavy buyers of agricultural commodities. 
Germany in particular requires enormous quantities of the products 
of the soil. Both nations, and in fact nearly all continental European 
states, have adopted our own protective tariff idea: only they have 
advanced beyond us and worked out by extended study and experi- 
ence, dual tariff ■ systems under the terms of which they are now 
able to reward their commercial friends and punish those who 
decline to exchange concessions with them, leaving us "standing 
pat" on our rigid single schedules of ten years ago, in the company 
of Servia and Portugal. The inevitable result of the general adop- 
tion of this system abroad — combining Protection with Reciprocity 
— will be the forcing of the hand of the United States. We are, at 
the present moment, enjoying Germany's minimum rates only by 
sufferance, through the existence of a modus vivendi, expiring July 
1st. In an effort at making some amicable adjustment of our trade 
relations with that nation, President Roosevelt last autumn sent to 
Berlin a commission to discuss the questions at issue with the Ger- 
man authorities. This commission has returned, but it is under- 
stood that negotiations are still pending. It is hoped that arrange- 
ments may be made for the extension of this truce, in the belief 
that, in the near future, Congress will be permitted to take up the 
entire subject and give it the consideration it deserves. 

Meantime, France is preparing to make it as unpleasant for our 
exporters as possible. Under the very limited exchange of conces- 
sions negotiated under the utterly inadequate provisions of section 
three of the Dingley bill, we enjoy the French minimum rates, but 

(45o) 



Reciprocity with Continental Europe 1 1 

it is evident that we will soon be compelled to pay the maximum on 
all commodities not specifically enumerated in the agreement now 
in force. 

It is held by some who insist upon a retention of our present 
duties intact, that the attitude of Germany and France at this junc- 
ture is distinctly hostile, and should be met in a retaliatory spirit. 
In the face of the facts, however, that Germany has been buying 
about twice as much from us as we have bought from her, it is idle 
to assume any such position. We, ourselves, have been the aggres- 
sors in this tariff business. Our course has clearly been such as to 
invite reprisals. The blow to our foreign commerce predicted by 
President McKinley in his last public address is about to fall. The 
time is at hand when our commercial relations with continental 
Europe must be overhauled, whether we desire to open up the 
subject or not. There is no alternative save that of stupidly stand- 
ing by and viewing with apparent unconcern a campaign of sapping 
and mining going on under the very foundations of our commerce 
with the richest group of countries in the world. And in the con- 
sideration of this matter, it should never be forgotten that we have 
not only to conserve our present lucrative business in manufactures 
with those nations, but, what is even more to the point, the possi- 
bility of opening up a new trade of high importance is involved. I 
refer to a business in such important articles of export as live 
cattle, dressed beef, canned foodstuffs and pork products — in brief, 
the output of the feed-lots and grazing grounds of the corn belt 
and the range. 

Reciprocity is not restricted in its application to mere tariff 
modifications. The earliest use to which the principle was put in 
our political history was in exchanging concessions with Great 
Britain on the navigation laws. Both France and Germany now 
have regulations excluding or restricting the introduction of most 
of the class of farm products mentioned, from alleged fear of intro- 
ducing disease. England's experience in taking freely of these com- 
modities for a long series of years demonstrates that such treatment 
on the part of continental powers is not justified by the facts: that 
the allegations of danger of infection from these sources are not 
at all warranted. Assuming, however, that the French and Germans 
have acted in good faith in the matter of excluding this big line of 
American commodities through veterinary and sanitary regulations, 

(451) 



12 The Annals of the American Academy 

it is clear that the conditions now surrounding the production, 
marketing and exporting of live bullocks for prompt slaughter at 
port of landing and the rigid inspections now in force at all our 
great packing plants are such at the present time as to enable us to 
satisfy European consumers of the soundness and wholesomeness 
of these products. But we have been none too generous in our 
treatment of European imports of manufactured goods in our 
custom houses. Our friends and would-be customers have griev- 
ances of their own beside the onerous Dingley schedules. Our 
regulations governing appraisements, for example, are called bur- 
densome and unfair. 

Reciprocity is the game of give and take. When we show a 
disposition to do as we would be done by all along the line with 
these people, it is not improbable that the doors of such great 
markets for food products as Paris, Vienna, Hamburg, Bremen and 
Berlin will be thrown at least part way open to the American steer 
and the American hog. Nearly all Europe needs more bread and 
meat. The middle west has a surplus of both. Germany is suffering 
the greatest meat famine ever known in the empire. Horse flesh, 
even dog meat, is on sale, as shown by consular reports. Prices for 
beef and pork are prohibitory. There is no roast in the laboring 
man's pot. He is hungry and he knows that in America the major 
portion of the beef carcass is sacrificed at nominal figures while the 
fastidious citizens of the Great Republic are bidding up the price 
of loins and ribs on one another ! Still he cannot buy because 
Congress and the Reichstag at present stand between him and the 
American supply. 

When it is stated that London and Liverpool buy nearly 
$35,000,000 worth of live bullocks annually in our American market, 
and that this buying produces competition that puts about $15 per 
head upon every beef animal grown on American farms, some little 
idea may be gleaned of the importance of gaining, if possible, 
through reciprocal concessions, the continental markets for food 
products. And if Congress delays the negotiations involving these 
important questions for two years more, the opportunity will be 
virtually lost. Canada and the Argentine can provision German) 
if the necessary trade can be made: and negotiations looking toward 
this very end are in progress now between Ottawa and Berlin. Still 
we are told to "wait"! 

(452) 



Reciprocity with Continental Europe 13 

The new German maximum on wheat is $1.78 per 100 kilos, as 
against $1.30 to the nations with which she has treaty relations. 
The duty on corn will be 48 cents per 100 kilos higher than to 
countries that make treaties. On wheat flour a discrimination of 
$1.94 per 100 kilos comes into play against us. American sausages 
will pay $16.66 per 100 kilos, as against $9.52 by competing ex- 
porters ! And so on through the list. 

In the so-called "tropical" reciprocity of Arthur, Blaine and 
Harrison, under the McKinley law, little of special value to Amer- 
ican agriculture was to be had. The manufacturer benefited, but 
the farmer was not specially interested : and in negotiating the 
Argentine treaty under section four of the Dingley act concessions 
had necessarily to be made on farm products such as wool and 
hides. Hence the farmer took little interest in any of those arrange- 
ments. But now he is awake ! European reciprocity means some- 
thing to him. It means, in fact, millions annually to those who 
dwell upon the soil. It means, or should mean, a broader vent for 
our surplus breadstuff s and provisions : a steadier range of values 
for those articles in domestic markets. It means, or ought to mean, 
a better chance to make a regular profit from feeding high-priced 
corn on high-priced land : and this, in turn, means conservation of 
the fertility of the soil that is the basis of our national prosperity. 

Recognizing protection as the established policy of our country, 
we take the position that our industries can safely yield enough to 
permit of the necessary bargains being entered into to secure wider 
markets for these surplus commodities. If arrangements for the 
entry of many farm and factory products to these great continental 
markets can be made on the basis of conceding up to twenty per 
cent of the Dingley duties, the bargain is a good one, and in the 
present temper of the people may not with impunity be strangled 
by interests that have grown rich and powerful by virtue of special 
privileges long enjoyed. We maintain that four-fifths of the exist- 
ing duties, plus 3,000 miles of transportation, is protection enough 
for any domestic industry under any honest application of that 
principle, and we challenge debate upon that proposition. Unless 
aH signs fail, the farming vote will come very nearly consolidating 
on the affirmative side of that question, regardless of partisan 
politics at the next elections. Signs on every hand indicate that the 
agrarian interests of America propose to stand together in this 

(453) 



14 The Annals of the American Academy 

coming fight for European reciprocity. In at least one conspicuous 
instance at the congressional election of last November, a farming 
district with a normal Republican majority of 10,000 made this the 
issue, and, notwithstanding the most vigorous efforts to save a dis- 
tinguished member of the ways and means committee of the House 
of Representatives, who defied his constituents on this point, he 
went clown to defeat ; his manager acknowledging after the election 
that "the farmers did it." 

Those who assume, therefore, that reciprocity as a political 
issue in this country is dead, are likely to discover in the near future 
that it was never so much alive as at the present time. Indeed, a 
situation is rapidly developing that may render it the part of wisdom 
for all who hope for the maintenance of reasonable protection for 
American industries to co-operate with, rather than oppose, those 
who are proposing that moderate reductions be granted at once in 
exchange for valuable favors to be received. 

In August, 1905, six hundred delegates, representing the lead- 
ing agricultural and commercial organizations of the United States, 
met in national convention at Chicago. They endorsed reciprocity 
through maximum and minimum tariffs and urged the appointment 
of a permanent non-partisan tariff commission. This convention 
also organized the American Reciprocal Tariff League, to promote 
the principles endorsed. In January, 1907, a like number of dele- 
gates, representing similar interests, met in a national foreign com- 
merce convention, held in Washington, D. C, and arrived at similar 
conclusions. 

The significant fact about these two important conventions is 
that the first was called by the West, the East heartily responding; 
and the last was called by the East, the West cordially responding 
and co-operating. In each case the initiative had been taken with- 
out prior conference with representatives of other sections. More- 
over, it was announced at the Washington convention that eighty 
per cent of the membership of the National Association of Manu- 
facturers favored early tariff reform. The theory therefore that 
the mills and factories of the country stand solidly for a continua- 
tion of existing conditions is thus completely overthrown. 

The question is how long can the few, who apparently have the 
political power to defy the sentiment of the country, safely exercise 

(454) 



Reciprocity with Continental Europe 15 

their arbitrary authority? To the unprejudiced observer it looks 
as if they were "riding to a fall." 

The passage at the coming session of Congress of an act 
authorizing the Executive to enter into commercial treaties with 
foreign nations on the basis of conceding up to twenty per cent of 
the Dingley schedules, in other words, the extension of the pro- 
visions of section 3 of the present law to the entire list, would not 
only pave the way to reciprocal arrangements having high com- 
mercial value to the United States but would, in all probability, 
warrant the party in power in postponing the proposed general 
revision of the tariff until such time as the matter can be given the 
necessary consideration. Looking towards this latter end, the ap- 
pointment of a high-grade, non-partisan commission, charged witli 
the duty of making a careful study of our trade conditions, both 
foreign and domestic, would be of great service both to the country 
and to Congress. Anything and everything that tends to minimize 
the power of comparatively unimportant local interests in shaping 
any further tariff legislation to be attempted is a consummation to 
be strenuously sought by the business interests of the nation at 
large. What we want in this whole business is the turning on of 
the light. Publicity is the great cure for many existing evils. We 
need a regularly established tariff commission, the members of which 
shall be men of sufficient caliber and standing to command the 
confidence of the country. A careful study of all the facts by such 
a commission ought to precede any wholesale overhauling of the 
American tariff, but in the meantime it is positively unwise and in 
the highest degree imprudent for Congress to neglect to authorize 
the negotiation of at least temporary agreements with the leading 
countries of continental Europe, lest through delay opportunities 
of an exceptional character be lost. 



A BRIEF HISTORY OF THE RECIPROCITY POLICY 



By William Eleroy Curtis, 
Correspondent of the Chicago Record-Herald, Washington, D. C. 



Chester A. Arthur, twenty-first President of the United States, 
was the author of what is known as the Reciprocity Policy for 
promoting the export trade of the United States. A reciprocity 
treaty with Canada, however, was negotiated by William L. Marcy 
and Lord Elgin in 1854 and continued in force from March 16, 
1855, until March 16, 1865, but it was unsatisfactory to both coun- 
tries, because it did not go far enough. It provided for a free inter- 
change between the two countries of natural products from the 
farm, the sea, the forest, the orchard, and the mine, but included no 
manufactured merchandise, which was not produced to any extent 
in Canada and was still heavily taxed. It did not admit Canadian 
vessels to the American coasting trade, and for various similar 
reasons it was also unpopular in the United States. Therefore, 
when the ten years of its natural existence drew to an end, notice 
of its termination was given by the United States government. 

Periodical efTorts have since been made on both sides of the 
St. Lawrence to secure reciprocal trade agreements and conventions 
which would have been of the greatest advantage to both countries 
have been negotiated from time to time. Their ratification by the 
United States Senate has been defeated through the efTorts of the 
fishermen of Massachusetts, the farmers of northern New York and 
New England, the lumbermen of Michigan, Minnesota and the 
Puget Sound States, and other interests on this side of the border 
which object to Canadian competition. 

The Liberal party in Canada has always advocated commercial 
union with the United States, and Sir Wilfred Laurier, the present 
Prime Minister, has been an apostle of "commercial annexation/' 
President McKinley, Secretary Blaine, Senator Hoar and other 
able, far-sighted statesmen have advocated a similar policy, but the 
petty producers of hay, butter, eggs and potatoes have been more 
influential than the great manufacturing interests, which might have 
found a large and profitable market in Canada if our Congress had 
been wise enough to offer free admission or reduced rates of dutv 

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A Brief History of the Reciprocity Policy iy 

to the limited agricultural products of the Dominion. The fisher- 
men of Gloucester have been able to shape the commercial policy of 
the United States against the efforts of our merchants and manu- 
facturing industries. The sawmill owners of Michigan and Wis- 
consin have been willing to admit Canadian logs free of duty, but 
have insisted upon a prohibitive tariff against Canadian lumber. 
The selfishness of a few farmers, fishermen and sawmill owners 
whose combined interests are insignificant, has prevented the manu- 
facturers of the United States from enjoying a monopoly they might 
easily have obtained among Canadian consumers. 

The first active endeavor to extend the export trade of the 
United States in the Latin- American republics and colonies by means 
of reciprocity treaties was inaugurated by President Arthur in 1882, 
when General Ulysses S. Grant and William Henry Trescott, rep- 
resenting this government, and Matias Romero and Estanislao 
Canedo, representing the Republic of Mexico, negotiated a treaty 
under which certain merchandise from the United States was to be 
admitted free of duties into Mexico, and certain products of that 
country were to be admitted free into the United States. But the 
Congress of the United States failed to enact the legislation neces- 
sary to carry it into effect, and the treaty expired by limitation upon 
the 20th of May, 1887. 

In 1884 John W. Foster, then Minister to Spain, negotiated a 
similar treaty with that government, acting in behalf of its Amer- 
ican colonies, Cuba and Porto Rico. A third treaty was negotiated 
by Mr. Frelinghuysen, then Secretary of State, with Don Manuel J. 
Galvan, a plenipotentiary appointed for that purpose by the govern- 
ment of Santo Domingo. Both of these treaties failed to receive 
the sanction of the Senate of the United States. 

During the same year, 1884, under the authority of Congress, 
President Arthur appointed a commission "to ascertain the best 
methods of securing more intimate international and commercial 
relations between the United States and the several countries of 
Central and South America." It was composed of George H. 
Sharpe, of New York; Thomas C. Reynolds, of Missouri, and 
Solon O. Thacher, of Kansas, with William E. Curtis as secretary. 
Mr. Sharpe, having resigned in March, 1885, Mr. Curtis was ap- 
pointed by President Cleveland to succeed him. 

This commission visited the several American republics with 

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1 8 The Annals of the American Academy 

instructions ( I ) to ascertain by inquiry the opinion of merchants 
actually engaged in trade concerning the most practicable means 
of promoting commerce with the United States; (2) to confer with 
the several governments as to the advisability of holding an inter- 
national American conference, and ascertain their views as to what 
topics should be discussed at such a gathering; and (3) to initiate 
reciprocity treaties similar to those already arranged with Mexico 
and Spain, with such of the American republics as desired to enter 
into negotiations for that purpose. 

The commission returned to Washington and made its report. 
With a single exception, the governments visited expressed not only 
a willingness, but a desire, to enter into reciprocal arrangements 
with the United States, and in several cases a definite understanding 
was reached and protocols exchanged. 

The commission recommended that an international conference 
be held in Washington, to which all of the republics visited had 
consented to send delegates, and a list of topics for consideration 
was submitted. A bill was passed by Congress to carry out that 
recommendation, and on the 20th of May, 1888, became a law 
without the approval of the President. The conference met at 
Washington in October, 1889, all of the independent American 
nations being represented except Santo Domingo. 

Among other topics announced for discussion was "Measures 
toward the formation of an American Customs Union, under which 
the trade of American nations with each other shall, so far as pos- 
sible and profitable, be promoted." This was referred to a com- 
mittee, which, after due consideration, reported that the systems of 
taxation and the condition of the public revenues of the Latin- 
American republics made such a customs union as had been pro- 
posed, that is, a free interchange of merchandise, impracticable ; but 
recommended the negotiation of commercial treaties embracing 
mutual tariff concessions, so far as could be done without impairing 
the revenues necessary to sustain their several governments. 

"To escape the delay and uncertainty of treaties," Mr. Blaine 
suggested "an amendment to the pending tariff bill authorizing the 
President to declare the ports of the United States free to all 
products of any nation of the American hemisphere upon which no 
export duties are imposed, whenever, and so long as, such nations 
shall admit to its ports free of all national, provincial (state"), 

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A Brief History of the Reciprocity Policy 19 

municipal and other taxes, our flour, eornmeal and other breadstuff's, 
preserved meats, fish, vegetables, fruits, cottonseed oil, rice and other 
provisions, including all articles of food, lumber, furniture and 
other articles of wood, agricultural implements and machinery, 
mining and mechanical machinery, structural steel and iron, steel 
rails, locomotives, railways cars and supplies, street cars and refined 
petroleum." 

When the McKinley tariff act was under consideration a draft 
of such an amendment was submitted to the committee on ways and 
means by Air. Blaine and was rejected on the ground that it was 
contrary to the Republican doctrine of a protective tariff. The only 
man on the committee who voted in favor of it was William Mc- 
Kinley, the foremost apostle of protection. When the bill reached 
the Senate, however, in the summer of 1890, what was known as 
the reciprocity section was adopted, but it was the reverse of what 
Air. Blaine had suggested. It proposed retaliation instead of reci- 
procity. It imposed new and heavy duties upon tea, coffee, sugar, 
molasses and hides, but authorized the President to remove or 
reduce them, provided the nations from which such articles are 
imported, reduced or removed their duties upon the products of the 
United States. Under this authority amiable and valuable arrange- 
ments were made with nearly all of the republics of Central and 
South America and the Spanish and British colonies in the West 
Indies. Similar arrangements were made with France and Ger- 
many, and negotiations with Mexico were revived. Under them 
the exports of the United States to the Latin-American countries 
immediately increased from $63,000,000 to $103,000,000, and would 
have advanced still farther had not the Democratic administration, 
elected in 1893, revoked entirely the commercial policy of its pre- 
decessor, and repealed all of the reciprocity arrangements without 
even observing the ordinary courtesies of diplomatic intercourse. 

The result was perfectly natural. Our commerce with the 
other American republics and the West India colonies was thrown 
into confusion and our exports dropped to $88,000,000 the follow- 
ing year. 

The popularity of reciprocity was proclaimed at political con- 
ventions and demonstrated at the polls. It became one of the chief 
features of the program of the Republican party. Eloquent phrases 
were framed for its platforms, and its "spellbinders" excited the 

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20 The Annals of the American Academy 

enthusiasm of their audiences by their references to the treaties 
negotiated by Mr. Blaine. There is not the slightest doubt that the 
hope and expectation of a renewal of these arrangements, endorsed 
with cordial confidence by Mr. McKinley, contributed very largely 
towards his election, and there is not the slightest question of his 
sincerity. But the Republican leaders in Congress refused to fulfil 
the pledges of their party to the people. Through the influence of 
Speaker Reed and Mr. Dingley, chairman of the committee on ways 
and means, all practical propositions were rejected, and when the 
Dingley tariff act was published it was found to contain a few lines 
authorizing the President of the United States to do what was 
impossible. He was permitted to offer foreign nations concessions 
that were worthless, provided they would give us concessions that 
were valuable. He was authorized to admit champagne, the "lees 
of wine" and one or two other articles into the United States at 
reduced rates of duty, provided the nations from which they 
came would admit our flour, beef, pork, lard, provisions, fruit, 
agricultural machinery free or at reduced rates of duty. It was 
an absurd and preposterous proposition, and was merely intended 
to humbug the people who had supported the Republican ticket in 
the confidence that its candidates, if elected, would give them a 
broad, wise, generous commercial policy. 

President McKinley, however, did the best he could with the 
limited authority allowed him and immediately designated John A. 
Kasson as a special commissioner to enter into negotiations. Mr. 
Kasson came very near performing a miracle. He succeeded in 
concluding several reciprocal arrangements of considerable impor- 
tance. They were much more valuable than anyone expected him 
to obtain. But the high tariff advocates, the champions of a "home 
market," in the Senate, under the leadership of Mr. Aldrich, refused 
to ratify anything that affected existing tariff schedules, and Mr. 
Kasson's work went for nothing. Senators and Representatives 
who had made the most urgent appeals to the voters of the country 
to stand by "McKinley and Reciprocity" voted against or pigeon- 
holed every measure that was intended to carry their promises into 
effect. A majority of the Republicans, both in the Senate and House 
of Representatives, have since resisted every effort that has been 
made to include reciprocity in the commercial policy of our govern- 
ment. Such Republicans as Mr. Dalzell denounce it as ridiculous, 

(460) 



A Brief History of the Reciprocity Policy 21 

and declare their intention to prevent its adoption. Like the states- 
man in the Iowa Legislature who was in favor of a prohibition law, 
but opposed to its enforcement, a majority of the Senate committee 
on finance and the House committee on ways and means are in 
favor of reciprocity as a vote-getter, but are opposed to its applica- 
tion to our tariff system. 

Unfortunately, under the rules of the Senate, Mr. Aldrich can 
prevent the ratification of all reciprocity treaties that may be nego- 
tiated, and his disposition is uncompromising. The President, the 
Secretary of State and the other members of the Cabinet, are 
strongly in favor of broad, generous commercial treaties, but it is 
worse than useless for Mr. Root to attempt negotiations, because he 
realizes that Senator Aldrich and his sympathizers will prevent 
ratification// The critical situation of our trade with Germany does 
not appeal to them at all. They coolly declare that Germany must 
buy our raw cotton and our food products, because she cannot get 
along without them, and that she dare not provoke a tariff war. 
Furthermore, if she does, we will have every advantage. They 
assume the same hostile attitude toward every other nation and 
point to the enormous growth of our export trade as convincing 
evidence that we need no commercial treaties. 

Such is the situation, and it will remain unchanged as long as 
the present influences control the action of our Congress. 



RECIPROCITY AND THE MIDDLE WEST 



By D. M. Parry, 

Vice-President of the Manufacturers' Bureau of Indiana, Indianapolis. 



President McKinley, strong protectionist though he was, left 
as his last message to the nation an eloquent and prophetic appeal 
for reciprocity. This appeal still points the course of wisdom and 
patriotism in our commercial relations with other lands. 

The movement for international peace is a noble cause, and so 
also is reciprocity. The last generation assiduously labored to erect 
tariff walls between the nations, and it now devolves on this and 
succeeding generations to tear them down. It will be a herculean 
task, this thing of tariff demolition, but it must be done. Some of 
these tariffs have had patriotic motives behind their construction, 
but now they largely stand for vested wrong, and the evil they work 
far outweighs the good. They are a burden on the industry of 
civilization, a curse to the world. They breed monopoly, they 
assess a penalty on honest labor and enterprise, they cause an artifi- 
cial diversion of wealth from the many to the few, and they build 
up strong centralized governments with standing armies and a 
hankering for war. Remove them even partially and it will be like 
taking a heavy load from the backs of humanity. There are many 
arguments from a world point of view in favor of reciprocity, or 
the policy of lowering the tariff barriers by mutual agreements 
between nations. It is a noble cause and one that should enlist the 
co-operation of students and statesmen in every land. 

But from our own point of view as a nation there are also 
many reasons why we should strive for reciprocity. A self-govern- 
ing people ought not needlessly to tax themselves or erect artificial 
barriers to the extension of their own commerce, and yet these are 
the very things which our present tariff policy accomplishes. 

The United States is becoming more and more a manufacturing 
nation. It is its destiny to export the finished product of manufac- 
ture and to retain at home its raw materials and food products for 
its own consumption. The exports of finished product arc increas- 
ing year after year despite the tariff walls, but the pressure to find 

(462) 



Reciprocity and the Middle West 2$ 

a foreign vent for the surplus of this product is becoming more 
intensified and in time must force us as a nation to seek freer trade 
relations abroad instead of commercial isolation. Reciprocity is 
the wisest policy to accomplish this end, for it kills two birds with 
one stone — it not only reduces the burden of our taxation, but it 
also opens up foreign markets to our manufactured product. 

The present tariff should be made to serve as a maximum 
tariff, and Congress should adopt a minimum tariff at least 50 per 
cent lower. The executive department of the government should 
be authorized to enter into trade bargains with other nations within 
the limits of these two tariffs, and to assist it there should be a 
non-partisan board of tariff experts, who could handle the tariff as 
a national business proposition, having only in view the interests 
of the whole people. Such a board could reach conclusions which 
would occasion the least disturbance to business, while actually 
accomplishing something. At all events, it takes no prophet to 
predict a political upheaval unless the next Congress makes some 
actual progress along the lines of reciprocity. The tariff has 
reached its fullest development, and from this time on the question 
will be whether it shall be revised in a general way or whether we 
shall gain concessions from other countries in return for special 
reductions made. 

The tariff is not a sacred institution. As a tax it is one of the 
worst that can be levied. The only valid excuse for it has been the 
protection of American wages. On the principle of the greatest 
good to the greatest number, it has been assumed that we should 
encourage the development of industries by taxing ourselves suffi- 
ciently to enable the American made product to compete fairly with 
the "pauper" product of Europe. But this generous purpose "has 
been prostituted into a means for raising government revenue and 
for diverting wealth from the many to the few without compen- 
sating returns. The tariff now produces nearly three hundred 
million dollars, or almost one-third of the national revenue, all paid 
by the people when they pay their daily living expenses. In addi- 
tion to every dollar they thus pay they also pay an intermediate 
amount as a subsidy to the protected interests. We know that the 
importer adds to the original cost, transportation charges and his 
profits, the customs duty, together with an amount for interest and 
profit thereon. We also know that the prices paid for the protected 

(463) 



24 The Annals of the American Academy 

product are much higher in many instances than they would be were 
there foreign competition. We have seen some of the "protected" 
product sold on foreign soil in competition with the foreign product, 
and we must presume there was a profit in the transaction of selling 
it to the foreigner for less than it is sold to the people at home, who 
furnish the "protection." The difference between what the price 
of the protected article would be with foreign competition and 
what it is without that competition represents the indirect subsidy 
paid by the American people to the protected producer. When we 
come to realize that this subsidy exceeds many times the margin 
between labor costs at home and abroad, it makes us wonder how 
long the honest advocate of protection can be led to support some- 
thing that looks more like piracy than it does protection. 

There is no general disposition to be harsh or cruel to our 
protected industries, but they must realize that they are no longer 
infants but good healthy specimens of robust maturity. We take 
pride in the wonderful way they have waxed fat and great. But 
really it seems time they were being weaned — at least partially. In 
the making of reciprocity agreements we must be able to reduce 
schedules here and there, and in consideration of the protection 
they may actually need it would seem wise on the part of the pro- 
tected interests not to oppose fair and reasonable concessions in our 
tariff. There is no justice in hampering the development of unpro- 
tected industries by excluding them from foreign markets in order 
to give the protected industries an inordinate subsidy. 

In Indiana we are tariff payers rather than tariff beneficiaries. 
Only a small percentage of the people of the state have a vital 
interest in the tariff except to see it reduced. There is a sentimental 
belief in protection as something beneficial to industry in a general 
way, but there are certainly much less than five per cent of the 
people obtaining any part of their livelihood from the protected 
industries. The middle west is a part of the country that needs 
no protection. Its manufacturing industries are developing rapidly 
in the face of Eastern competition, and they have no fears of foreign 
competition. What they chiefly ask is the privilege of buying raw 
materials without having to pay the tariff fine. They also ask for 
the opening up of the principal foreign market in which they are 
interested, and that is the Canadian market. 

The Canadian trade is more important than all the commerce 

(464) 



Reciprocity and the Middle West 25 

anticipated for the Panama Canal, and yet our tariff policy in respect 
to Canada could hardly be worse had it been dictated by a foreign 
enemv. We ought to lose no time in securing the best reciprocal 
arrangement we can with that country. We need its raw materials 
and we can send it the finished product of our factories. Our 
present policy is barring us out of Canada and building up the indus- 
tries of that country. Many factories have been established there 
in late years to supply a trade that could just as well have been 
supplied by our own factories. This is an example in which the 
tariff serves to protect the foreign producer instead of the home 
producer, and examples can be given showing that our tariff has 
the same effect upon our commercial relations to still other coun- 
tries. 

As for the tariff on raw materials, why should this country 
be so anxious to exhaust its mineral wealth and denude its forests 
that it should bar these products from other countries? There are 
the items of coal and lumber, and I may as well also add pig iron, 
bar iron and kindred products. These are things needed by a host 
of industries, and if the nation believes in developing its industries, 
why should it handicap them by placing duties on such articles? 
Wisdom would seem to indicate that we should encourage the 
importation of as much of the raw material or semi-raw material 
of other countries as possible, thus conserving our own resources 
and serving to develop our manufacturing industries. 

There is large room for reform in onr tariff policy, and this 
reform can be best obtained through the adoption of reciprocity. 
It should be genuine reciprocity also, that is, reciprocity that actually 
accomplishes something. Thereby we can lessen the evil of tariff 
taxation, and at the same time protect both the industries that ask 
the chance to compete with the foreign producer and the industries 
that cannot compete without the tariff subsidy. 



RECIPROCITY AND ITS RELATION TO FOREIGN TRADE 



By G. L. Duval, 
Of Wcssel, Duval & Co., Exporters, New York. 



In a country producing vastly more than its own requirements, 
every dictate of prudence prompts such procedure as will assure the 
freest and the broadest market for its surplus. Reciprocity, the 
most equitable and the most logical step in that direction, is opposed 
in the United States by the extreme protectionist, who fears in it 
the thin edge of a wedge which will split the sacred tariff. The 
"stand-patter,"' claiming as of his contrivance the phenomenal pros- 
perity which the country enjoys, is oblivious to the growing senti- 
ment for tariff reform, and even the clarion note from rock-ribbed 
Massachusetts, the nursery of statesmen in the past, falls on deaf 
ears. < 

We are about completing an era of ten years of prosperity and 
development for which the past affords no parallel. Abundant har- 
vests, leaving great surpluses coincident with scarcity abroad and a 
demand at extreme prices, have sent the favorable balance of trade 
to enormous figures, and induced a home development which over- 
taxes domestic financial facilities. With characteristic enterprise, 
the mills and factories have kept pace with and in some instances 
outstripped the increased demand, so that the industrial system of 
the country is a ponderous one and dependent upon either a con- 
tinuance of the home demand or a greatly increased foreign outlet. 

The policy of extreme protection has hitherto escaped the 
natural penalty of reprisal, which, however, is now seriously threat- 
ened. Farm products have been the most immune from this menace, 
as well as from the effect of competition, because their market in 
the populated countries of Europe is hardby and necessitous, while 
competing supplies are drawn from a much greater distance. Dis- 
crimination against us, however, will neutralize whatever advantage 
we now enjoy, and undoubtedly array our farmers under the banner 
of reciprocity. 

In the meantime, and quite apart from considerations affecting 
the agricultural output, what are the prospects of a market for the 

(466) 



Reciprocity and its Relation to Foreign Trade 27 

product of our vast industrial system ? Can we reasonably expect a 
continuance of the present home demand, upon faith in which ex- 
pansion has been based? Will the railroads extend and rebuild 
indefinitely? Will the reconstruction of our great cities progress 
without interruption? These are the developments of prosperity, 
and prosperity is not a perennial plant. If the past teaches any 
lesson, it is that periods of depression follow periods of intense 
activity, and are usually relative in extent and duration. 

Deprived, even measurably, of his home market, the manufac- 
turer cannot rind an outlet in the countries near at hand, which 
themselves depend upon their manufacturing industries. He must 
look to new, undeveloped and distant markets, where he will find 
competition strongly entrenched. Happily, there is nothing visible 
in the agricultural situation — the most potent factor in prosperity — 
to cause fear of depression from that source (subject, of course, to 
the many uncertainties before harvest time), yet a note of warning 
has nevertheless been sounded simultaneously by several prominent 
financiers that the onward movement has come to a pause. Pause 
in industry means reaction. There is no such thing as standing 
still, and it is precisely upon this theory that our "captains of indus- 
try" have forced the pace. 

The manufacturers as a class believe that the foreign markets 
to which they will look for relief are to be captured by a coup de 
main when required. Experience should have taught them that 
spasmodic effort of that kind is not broadly successful. Each of 
those markets has its peculiar practices or requirements, which are 
constantly studied and catered to by the European manufacturer, 
whereas our mills and factories are too often interested only when 
home demand languishes. The industrial depression and congestion 
which followed the panic of 1893 is of too recent date to be for- 
gotten, and the desperate and expensive efforts made at that time to 
divert trade from established channels should serve as a warning. 
It is, moreover, a far more serious matter to procure the business 
that will keep the actual industrial system employed than it was to 
procure the business necessary for a like purpose fourteen years ago. 

The natural tendency of the buyers in foreign countries is to 
purchase their requirements in the same market where the product 
of their own country finds a sale. This sentimental preference is 
sustained by substantial reasons : Freight rates are lower when 

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28 The Annals of the American Academy 

homeward employment is offered to the outward carrier, and the 
proceeds of products sold abroad incur a banking commission if 
transferred elsewhere. The latter tax, though small, is onerous 
when applied to the close terms attaching to large transactions, and 
it is an important item in the aggregate. It attaches not only to 
exports, but to imports as well, because, since England has been 
the most advanced country in encouraging reciprocal trade, London 
is the clearing house of international commerce, and the pound 
sterling is the standard of value. 

The "stand-patter" warns us to let prosperity alone ; that con- 
ditions are eminently satisfactory; that foreign countries are taking 
from us an ever-increasing proportion of our product, and that even 
if adverse conditions overtake us reciprocity is not an effective 
remedy. He fails, however, to state his authority for trading on a 
continuance of existing conditions. He overlooks the menace of 
action by Germany, long deferred through courtesy, and he ignores 
the probability that other countries will follow her lead. The possi- 
bility of discrimination against our manufactured products in con- 
suming countries has not been considered in this article. Such 
action would greatly add to our difficulties. There has been no 
action or threatened action in that direction, but we may be sure 
that the republics of South America, while fully reciprocating our 
friendly expressions, are keenly alive to the difference between 
precept and practice. Reciprocity, to be sure, is not the sovereign 
or even an immediate remedy for the ills we have considered. It is 
the first step only, and by encouraging closer relations will lead to 
the removal of many impediments. If reciprocity had been applied 
at some time in the past, it would already have attained important 
development. The sooner it is applied the sooner it will yield 
results. 

Since the necessity of cultivating foreign trade is, after all, the 
motive which will influence any action taken on reciprocity, we may 
as well briefly consider the further co-operation which is necessary 
to complete success: European bankers make the requirements of 
legitimate business their first care and measurably protect them 
from the intolerable high rates to which money is driven by specula- 
tion. The inroad which Germany has made in supplying foreign 
markets is in great measure due to the enlightened banking facili- 
ties which it extends to manufacturers and which the manufac- 

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Reciprocity and its Relation to Foreign Trade 29 

turers in turn pass on to the foreign client through the export 
merchant. Similar conditions to a certain extent prevail in England 
and France, whereas our manufacturer in his relation to the export 
trade exchanges his shipping receipt for a check, so that the terms 
offered by the American export merchant contrast unfavorably, and 
the preference is strongly against him. Promising enterprises in 
the South American republics seeking capital have gone begging 
to Europe because they could not be handled here. Indeed, the 
equipment of the American merchant is not complete without a 
European connection, and when business depends upon the greater 
facilities obtainable there, either it is entirely lost to us or we lose 
an important share of the benefit accruing. If the "pause" or re- 
action, of which our financiers warn us, is applicable to "Wall 
Street'' prosperity, it will not be altogether a national calamity. 
The financial resources of this country, pledged in the first instance 
to the giant combinations of capital, are inevitably involved in the 
attendant speculation. No others need apply. But if we are ap- 
proaching a period of business stagnation which, like its predecessors 
of 1837, '57> '73 ancl '93j shah" affect the general industries of our 
country, the situation is more serious. If the latter is the case, it 
behooves our legislators to see to it that our foreign trade relations 
be improved to enable us to relieve the oversupplied home market 
by sales in communities not affected by the financial stringency. The 
means for promoting our foreign commerce are at hand. It only 
rests with Congress to apply them. 

N. B— The writer of the foregoing article asks us to say that while his 
remarks upon the indifference of the American manufacturer and the atti- 
tude of the American banker are general, there are, of course, notable excep- 
tions to the rule. — Editor. 



WHAT AMERICANS MUST DO TO MAKE AX EXPORT 

BUSINESS 1 



By James W. Van Cleave, St. Louis, Mo. 
President National Association of Manufacturers of the United States 

of America. 



Mr. Chairman and Gentlemen of the Convention: 

As I look around this hall this afternoon and see the interests 
which are represented here I am reminded that commercially the 
United States touches the outside world at many points, and touches 
it intimately. Where are now the men and the interests that once 
demanded, "What do we care for Abroad?" The program of this 
convention is a response to that challenge. 

Industrially speaking, Abroad might have seemed to mean 
little to the average American of 1857, 1867 or 1877. But it means 
much to us of 1907. And it will mean still more to the Americans 
of 191 7 and 1927. W r e are richer than we were in those earlier and 
more boastful days. In number as well as in volume our industries 
have expanded. But every step in this expansion makes an addi- 
tional demand upon us to open new markets in other countries for 
our products. 

Somebody has said that Nature wrote the "most favored 
nation" clause in the fiat which created the United States. It is 
easy for us who are in this hall, and who know what brought tis 
here, to grasp the force of this aphorism. 

The arithmetics of your boyhood's days and mine are obsolete. 
The big figures which thirty or forty years ago described the 
resources and advances of the United States are only the units of 
the sum which tell the story of its activities to-day. Hundreds of 
thousands and millions have dropped out of our industrial mathe- 
matics. We have to deal in billions now. 

In the year which ended two weeks ago the products of our 
mines went up close to the $2,000,000,000 mark, and the earnings 
of our farmers were almost $7,000,000,000. Our mills and fac- 
tories paid $3,500,000,000 to their employees, and. these produced 

1 An address before the Convention for the Extension of Foreign Commerce, held at 
Washington, D. C, January [4-16, T907. 

(470) 



What Americans Must do to Make an Export Business 31 

$15,000,000,000 of finished goods. The country's foreign trade 
passed the $3,000,000,000 line, and our domestic commerce amounted 
to more than $25,000,000,000. 

But these big figures warn us to look outside of our own coun- 
try for new outlets for our surplus. To a larger and larger extent 
every year home production outruns home consumption. The 
domestic market is our chief reliance, and always will be, but we 
must get new foreign markets for our surplus. 

One way of extending our foreign trade is through the creation 
of an adequate merchant marine. Subsidies by the national govern- 
ment, wisely distributed and regulated, will put our commercial flag 
again on the seas. The government ought to extend to ship builders 
and ship owners the same sort of protection as that by which our 
miners and mill owners have made the United States the greatest 
mineral-producing and textile-manufacturing country on the globe. 

But we need something more than a merchant marine to enable 
us to win new markets, or to hold those which we now have. We 
must learn the world's needs and tastes in merchandise, and set to 
work intelligently to supply them. This is particularly true of South 
America* Partly through better, shipping facilities, but chiefly 
through a better knowledge of the people and their wants, England 
and Germany are far ahead of us in their trade with South America. 
In 1906 we bought twenty per cent of all the merchandise which 
South America exported, but we sold to her only twelve per cent of 
what she imported. 

Although we produce most of the things which Latin-America 
needs, we are allowing our British and German rivals to beat us in 
trade with that portion of the world. In the aggregate of our 
manufactures we are far ahead of any other two countries combined, 
and our lead is rapidly increasing. In 1906 we exported $603,000,- 
000 of manufactures, but very little of these went to the people 
south of the Caribbean. 

The government here in Washington is doing something toward 
marking out paths by which, with our co-operation, we can extend 
our trade abroad. Secretary Root is improving the consular service, 
and is equipping our government agents at the world's chief im- 
porting points to learn those people's needs, and to study how we 
can supply them. On application by any American manufacturer, 
Secretary Straus' Department of Commerce and Labor will send 

(470 



32 The Annals of the American Academy 

samples of goods which England, Germany and our other rivals sell 
in China, Japan, South Africa, Egypt and South America. 

We must encourage the government to broaden this work, so 
as to apply it to all countries and to all important products which 
we sell. But the practical work of extending our trade has to be 
done by us as individual manufacturers and exporters. Our own 
special representatives on the ground must utilize and supplement 
the work done by the government's agents. 

Even with the recent advances in our government's methods 
of ascertaining the world's needs and tastes, the German govern- 
ment is ahead of us. And the work done by the special agents of 
Germany's individual exporters leaves us still farther behind. They 
go to the importing countries with a linguistic and technical knowl- 
edge immeasurably beyond that of the average American promoter, 
and they pursue their work with a skill, an energy and a persistence 
which our representatives do not approach. Our representatives 
must be equipped to talk the tongue of the people with whom we 
seek to win trade, must learn the sort of goods which they want, 
must make our credits agree with their customs and convenience, 
and we must very carefully avoid any airs of superiority over them. 
In every one of these requirements we have been lacking hitherto. 

As a people we Americans have inherited from England some 
good qualities and a few bad ones. One of the bad traits is a 
feeling of superiority over the rest of the world. This has led us 
to imagine that our language, governmental system, business meth- 
ods and general industrial and financial schemes are better than 
those of any other country. Now, on many points, our language 
may serve us better than any other language would, but in dealing 
with most of the other countries outside of England and her pos- 
sessions, our language needs to be supplemented by the tongue of 
those people. 

In the lapse of time, and under the stress of some hard knocks, 
England has given up most of her old air of self-sufficiency. We 
must also do it. This is imperative on us if we want to hold our 
own in the face of the competition which the other great industrial 
countries are putting up. We must learn that the world may be 
able to teach us some things which would be of value to us. 

In shaping our business methods to meet our competitors abroad 
we need to be particularly alert and open-minded. In a reasonable 

(472) 



What Americans Must do to Make an Export Business 33 

degree self-confidence is good, but egotism is bad for a country as 
well as for an individual. Especially must we grasp the truth that 
while airs of superiority over the rest of the world may not harm 
us when we want to buy, they must be dropped when we want 
to sell. 

We were all startled nine years ago when the Cuban war threw 
Porto Rico and the Philippines on our hands, ended the United 
States' idyllic exclusiveness, and cast us into the current of the 
world's political activities. But Dewey's guns at Manila Bay 
sounded for us no sharper portent than do the whir of our indus- 
tries as they break through their continental isolation. The deluge 
of products from our mines and mills warns us that the home con- 
sumer is no longer adequate, and that hereafter we must struggle 
with the rest of the industrial countries for dominance in the world's 
markets. Neither industrially nor politically can the United States 
go back to its old isolation. Nor would it go back if it could. 

Government subsidies will help us to create a merchant marine. 
And a merchant marine, reinforced by intelligent and active agents 
in the foreign trade centers, will help us to gain new markets. But 
we will not be able to hold those markets unless we strengthen our 
industries at home so that adversity, in its periodical swings round 
the globe, will, as compared with the rest of the countries, strike us 
latest and lightest, and leave us soonest. 

Nature has treated us Americans magnificently. She gave us 
a climate, a soil and an abundance and variety of minerals and 
watercourses for quick and easy communication between the dif- 
ferent sections which make our territory potentially the richest spot 
on the globe. But Nature warns us that she helps those only who 
help themselves. She tells us plainly that climate, soil, minerals and 
watercourses are merely tools for those who can use them. All these 
were here through the ages in which the Indian occupied this con- 
tinent, but they profited him nothing. The Indians whom Columbus 
met had made no important advances over the Indians who were 
here a score of centuries earlier when Columbus' ancestors were 
laying the foundations of the Roman empire. 

The United States has outgrown its transportation facilities. 
We need not only more double and quadruple railway trackage, but 
more mileage of main track. Our waterways must be improved so 
that we can adequately utilize our many physical advantages in 

(473) 



34 The Annals of the American Academy 

that direction. For at least two reasons we need the use of our 
rivers and lakes to the utmost possible extent — so as to get the ready 
communication which the railways, single-handed, cannot furnish, 
and also to keep down railway rates. 

To a considerable degree we have utilized Nature's favors. 
One of the ways in which we did this was through tariffs which 
have protected nearly every important interest which needs protec- 
tion. But discovery, invention and alterations in fashions change 
industrial conditions, so that tariffs need revision frojn time to time. 

In an address before the Boston Home Market Club two months 
ago I pointed out some of the reasons why the Republican party, 
in the national convention of 1908, should pledge itself to revise 
the tariff immediately after the inauguration of the President in 
1909, providing the Republicans elect that President, as I believe 
they will. I also gave reasons why that President, if a Republican, 
should call Congress in session to revise it just as he stepped into 
office, as President McKinley did in 1897. Elections will then be a 
long distance off, the demagogues will be silenced, business condi- 
tions and not politics will dictate the changes, the revising will he 
done speedily and sanely, and the trade disturbance which tariff 
changes always bring will be light and will end quickly. 

As an important preliminary to tariff revision, Congress should, 
either in the present session or early in the term which begins next 
December, authorize the appointment of a commission representing 
both parties and many interests, to go over the tariff, schedule by 
schedule, and recommend changes wherever desirable. President 
Roosevelt has a larger supply of good material from which to select 
such a commission than President Arthur had for the one which he 
appointed in 1882. 

This commission, like Arthur's, could get the views of experts 
of all sections and of many callings. It could consider the question 
of reciprocity and of maximum and minimum tariff rates in all 
their aspects. Such a body could render an even greater service, 
by its report, to the Congress which would meet in extra session 
in March, 1909, than Arthur's commission did to the Congress 
which expired in 1883. 

We must make better goods than our European competitors. 
We must improve our methods so that we can sell those goods as 
cheaply as our competitors sell inferior goods, or cheaper. We must 

(474) 



What Americans Must do to Make an Export Business 35 

do this notwithstanding the lower prices which Europe's employers 
pay for labor. x To accomplish this we will have to revise the tariff 
at the right time and in the right way. And we will have to give 
our labor the highest possible skill and efficiency. I have already 
mentioned what I think is the right way and time to revise the tariff. 

Expressed in terms of day's work and dollars and cents, what 
is called cheap labor may actually be dear labor. We must equip 
our laborers to do more work than the Europeans do in the same 
length of time, and do it better. 

To this end we should establish manual training departments 
in all our public schools, in which boys, beginning at the age of 10 
or 11, could learn to handle all the tools used in the ordinary 
mechanical trades, and we should provide trade high schools in 
which boys who pass through the manual training branch of the 
primary schools could become first-class mechanics. 

For at least two reasons the United States needs such school 
training in the industries. The labor unions limit the apprentices 
to very small numbers in most of the great trades, and prohibit all 
apprentices in some of them. The boys who get this sort of train- 
ing in the schools would more than supply the lack of apprentices, 
and would give our industries the new workers which they need. 
And these would acquire a skill, a readiness, an initiative and a 
general intelligence far above the grade of the average worker who 
served an apprenticeship in the ordinary way. 

All our great industries are in urgent need of additional skilled 
labor. Secretary Straus shows us one way of getting it. He points 
out that through any of our state boards we can import it without 
violating the contract labor law passed by Congress long ago. But 
I prefer to create these skilled laborers at home. In versatility and 
in general adaptability to new conditions the average American 
mechanic surpasses the average European in his calling. By a 
proper training in the mechanical arts in our public schools we can 
get an equipment for our workers which will place our industries 
far in advance of those of our European rivals. 

Many of the labor unions will oppose this policy of training 
the youth of our land to do the skilled work which is waiting to be 
done, and to get the high wages which we stand ready to pay for 
it. The labor unions constitute only a tenth of the workers of the 



(475) 



36 The Ann ah of the American Academy 

United States, and the proportion of oppressive labor organizations 
is steadily and rapidly decreasing - . 

As against the narrowness and the arrogance of the labor 
unions we must place the well being of the rising generation of 
Americans whom the unions would shut out from the profitable 
employment which they seek. And we must also consider the wishes 
of the great masses of our workers and the prestige' and prosperity 
of our country, all of which are assailed by the labor unions' pre- 
scriptive policy. 

A few weeks ago, in Chicago, I addressed the Citizens' Industrial 
Association of America on the necessity of establishing industrial 
peace — of peace between the employer and the worker, whether the 
worker belonged to a labor union or not, on the basis of equal and 
exact justice for all. 

As I look around this hall to-day, and see the representatives 
of all the great trade organizations gathered here to devise means 
to extend our commerce abroad, I am more than ever impressed 
with the necessity for industrial peace among us. 

The peace is even more necessary to the worker than it is to 
the employer. Unless we can open larger and larger markets abroad 
for our constantly increasing surplus of manufactures, many of our 
mills must stop. And our manufacturers and exporters will cer- 
tainly not be able to compete successfully with our foreign com- 
petitors for the new markets if we are exposed to a fire in the rear. 

In time of abounding prosperity like the present we should 
prepare for adversity. We cannot altogether prevent the failure 
of the crops on which, to a large degree, our business activity de- 
pends. Droughts will come from time to time. But science is 
arming farmers with weapons which make droughts less disastrous 
than formerly. Discovery, invention and intelligent precaution are 
making farming less a hazard than it used to be, and more of a 
calling on which forecasts can be made with some confidence from 
year to year. We are making two blades of grass grow where only 
one grew before. 

Crop failure is still a menace to general business in the United 
States, but this menace is not quite so portentous as it was once. 
Nevertheless, there is an especial need for conservatism and intelli- 
gent precaution in the business world in these days of activity 
when all our great industries and interests are scoring new "high- 

(476) 



What Americans Must do to Make an Export Business 37 

ests." Under any sort of a financial system panics will come some- 
times, so long as hope, cupidity and credulity lure men into danger- 
ous paths. Panics have a habit of coming with considerable regu- 
larity. They were here in 1818, 1837, 1857, 1873 ancl l8 93- A11 
arrived unexpectedly. Under the twenty-year law of periodicity 
another panic would be due in 19 13. Some of our prominent men 
are predicting that a panic will come earlier than that time. 

By avoiding all sorts of extravagances and vulgar display in 
our business and in our homes ; and by refusing to discount the 
future too much or to expand our enterprises too far with borrowed 
money, we can do much toward postponing panics, and also toward 
diminishing their disasters when they come. 

We must keep our political and our commercial conscience 
above suspicion. All quack political remedies for real or imagined 
ills like government ownership of railways we must shun. We must 
be clean-hearted and clean-handed in all our business transactions at 
home and abroad. To-day, with so much of the world still open 
for our exploitation, we have especial incentives for intelligent pre- 
cautions and also for intelligent enterprise in utilizing our magnifi- 
cent natural resources and of cultivating and extending the capa- 
bilities of our people. Out of Africa's hundreds of millions of 
imports annually we furnished only $19,000,000 in 1906. We sold 
to South America only $75,000,000 of the $600,000,000 of goods 
which she bought, and we contributed but $105,000,000 of the 
$1,100,000,000 of commodities which x\sia imported from the out- 
side world. And the volume of the imports into all these continents 
is rapidly expanding. 

Here, my friends, some of it at our own doors, is the vast 
empire which lies open to us to conquer. Give us sane tariff revision 
in 1909; give us adequate government aid for our shipping; give 
our boys an industrial training in the public schools ; give us har- 
mony between employers and workers ; let us combine foresight and 
enterprise in the regulation of our business ; let us push our trade 
abroad by men who have technical skill and who can talk the 
tongues of the countries, and we will outrun all our rivals in the 
race for new markets ; we will make our prosperity at home perma- 
nent and balanced ; and we will place our flag on all the world's seas. 



THE DOUBLE TARIFF SYSTEM 



By N. I. Stone, 
Washington, D. C. 



Recent discussion of the tariff problem has brought to light 
one very interesting fact which has not received due attention, viz : 
the perfect agreement between the extreme protectionists and advo- 
cates of tariff revision on one point, that the Dingley tariff cannot 
be allowed to remain in its present form. It is true that the 
"revisionists" are in favor of reducing certain rates as a means of 
obtaining reciprocal concessions from foreign countries in favor of 
our export trade, while the "stand-patters" would rather adopt a 
maximum tariff, higher than the present rates, as a means of 
retaliation against those countries which treat imports coming from 
the United States less favorably than those of other nations. But 
both men like Governor Cummins, and those like ex-Secretary 
Shaw and former Representative McCleary, agree that an addi- 
tional set of duties must be introduced in our tariff as a means of 
inducing or compelling other countries to grant us as favorable 
terms in their markets as they do to other countries. 

The United States has hitherto been able to get along with a 
single tariff, for the reason that our tariff framers had mainly one 
object in view: the protection of our home market against foreign 
competition. But even in the past, whenever our commerce with 
some country reached sufficiently large proportions to make our 
export interests felt, it was found necessary to enter into special 
reciprocity agreements with such countries, by which favorable 
terms were secured to our export trade in return for concessions 
on our part. We thus introduced an additional set of duties, or 
provided for total exemption from duty for certain articles, which 
were granted exclusively to the countries with which we concluded 
such treaties. 

Such were our reciprocity treaties with Canada in 1855 ; 
Hawaii. 1X76; and with a number of Latin-American countries 
under the reciprocity provision contained in section 3 of the Mc- 
Kinlev Act of 1890. 

(478) 



The Double Tariff System 39 

The experience of the United States is cited here merely to 
show that the single tariff system was not maintained in its strict 
integrity when exigencies of the times demanded certain modifica- 
tions. However, as the main purpose of our tariff legislation in 
the past was the protection of our home market, and as our export 
trade was largely confined to raw materials and foodstuffs of which 
the world stood in need, the single tariff system sufficed for the 
time being. 

The new trade situation created by our commercial expansion 
and the effort of American manufacturers to find an outlet for their 
products in foreign markets has, for the first time, placed a weapon 
in the hands of European countries, which they lacked until now. 

As pointed out above, the Europeans were formerly unable to 
retaliate against our protective system for the reason that they 
needed our agricultural and other crude products, and could not. 
subject them to high duties, without injuring their own interests. 
But when we attempt to invade their markets with manufactured 
products which threaten to displace their own goods, they natu- 
rally resort to the system of protection, of which we have taught 
them to make good use by our own example. 

Long before the European countries had to confront the situa- 
tion which they have dubbed the "American Danger," they had 
evolved a system (or, rather, systems) of double tariffs in attempt- 
ing to regulate their mutual trade relations. As it has taken decades 
for the leading systems to reach their present stage of development, 
a study of European methods and experience should throw some 
light on the problems confronting us at present. 

There are two distinct systems of double tariffs : The maximum 
and minimum tariff or, briefly called, the double tariff, and the 
general and conventional tariff based on reciprocity treaties. Each 
of these systems has its own advantages and defects. Each has its 
own sponsors and followers among the European nations. 

It is not the purpose of this article to make a plea for either 
tariff system. There are no inherent virtues which necessarily go 
with any system which may be devised. Tariff systems are em- 
pirically worked out by nations in conformity with their special 
needs. A system which may have proved best for one country 
under a given set of political and economic conditions, may be 
shorn of its advantages in another country under conditions vastly 

(479) 



40 The Annals of the American Academy 

different. Th« object of this paper is merely the impartial presen- 
tation of facts which can be gathered by any one from a study of 
tariff history. 

The Origin of the Double Tariff System in France. 

France furnishes the classic example of the workings of the 
maximum and minimum or double tariff system, while to Germany 
we must go for a study of the conventional tariff system based on 
reciprocity treaties. 

Before giving a description of the French system, it is well to 
mention the circumstances which led to its adoption in that country. 

At the time the present French Republic was proclaimed, in 
1871, France inherited from the imperial regime a system of com- 
mercial treaties with the principal countries of Europe based on a 
very low customs tariff. Under this tariff France admitted foreign 
products under low rates, and in numerous instances free of duty, 
and at the same time secured similar treatment for her own products 
in foreign countries through the reciprocity treaties mentioned. 

The system worked more or less smoothly until an element of 
disturbance was injected by the Frankfort treaty of peace, which 
terminated the Franco-Prussian war in 1871. This treaty provided, 
among other matters, that any concessions as to commerce granted 
to England, Belgium, Netherlands, Switzerland, Austria or Russia 
by either France or Germany were to be immediately and uncondi- 
tionally extended by either of them to each other. Until 1879 this 
provision worked no injustice to either of the contracting powers, 
since Germany had likewise in force a very low customs tariff. In 
1879, however, Germany changed her policy and adopted a protec- 
tive tariff. Within a few years the effect of this new tariff made 
itself felt, and the French realized that they had been "taken in" by 
the Germans. 

The situation was as follows : The French having renewed 
their commercial treaties with foreign countries in 1881, by which 
their low tariff policy was to be maintained until T892, were com- 
pelled to extend the same terms to Germany by virtue of Article XI 
of the Frankfort treaty, mentioned above. On the other hand, the 
Germans, having adopted a protective tariff for imports from all 
countries, were under no obligations to accord better treatment to 

(480) 



The Double Tariff System 41 

French products. The French felt a resentment against the new 
situation, which was both harmful to their interests and humiliating 
to their national pride. Although duties were advanced on some 
agricultural products during the eighties, the general tariff situation 
in relation to foreign countries remained unchanged. The depres- 
sion of prices of agricultural products made the French farmers as 
anxious to secure protection for their products as the manufacturers 
for their goods. The result was a powerful alliance of industrial and 
agricultural interests, which, backed by the aroused sentiment of 
wounded national pride, swept the country like a wave, landing an 
overwhelming majority in parliament committed to protection and 
the repeal of the commercial treaties. 

The parliamentary committee having the tariff in charge, with 
the well-known protectionist leader Meline at its head, saw very 
clearly that it would be exceedingly dangerous, if not impossible, 
to realize the demands of the extreme protectionists, who would 
pay no attention to foreign trade, adopt an autonomous high tariff 
and abrogate all the most favored nation treaties. They were alive 
to the fact that such a course would lead to the complete isolation 
of France and involve the loss of her export trade, which had 
assumed no mean proportions. 

Accordingly, they agreed upon the adoption of a double tariff ; 
general (commonly, though erroneously, called maximum) and 
minimum. The general tariff was to be applied to all countries in 
the absence of any specific agreement or treaty to the contrary. 
The minimum was to be granted to those nations which would agree 
to treat French products as favorably as any other, or would make 
other concessions deemed adequate by the French government. 

As the tariff reform was undertaken by protectionists, the 
minimum tariff was fixed sufficiently high to afford adequate pro- 
tection to the French producers. But, since a minimum tariff of 
this kind could not of itself induce foreign countries to make con- 
cessions to French products, it was found necessary to raise the 
maximum rates either to a prohibitive figure or, at any rate, to an 
extent which would compel foreign countries to seek to secure 
minimum rates if they would keep up their trade with France. In 
other words, making the minimum rates protective necessarily re- 
quired making the maximum prohibitive or retaliatory. 

(481) 



42 The Annals of the American Academy 

The Experience of France with Foreign Countries. 

It was predicted by the advocates of reciprocity treaties that 
the new tariff system would make it difficult for the government to 
secure favorable arrangements with foreign countries for French 
exports. As the chief object of a double tariff system is to obtain 
favorable terms for home products abroad, the success of the nego- 
tiations with foreign countries constitutes the crucial test of such 
a system. The experience of France in this respect should there- 
fore receive close attention. 

The following countries accepted the French minimum tariff 
in exchange for their own minimum rates : Germany, Great Britain, 
Austria-Hungary, Russia, Belgium, Holland, Sweden-Norway and 
Turkey. On the other hand, the maximum tariff had to be applied 
to imports from Spain, Portugal, Italy, Switzerland, Roumania, 
Greece and the United States, resulting in loss of trade with all of 
those countries. Let us consider first the countries with which 
amicable arrangements were concluded at once: 

Germany. — Article XI of the Frankfort treaty leaves no room 
for tariff hostilities between Germany and France, each granting 
the other by an automatic arrangement the lowest rate given by 
either to any of the six European countries mentioned above. 

With Great Britain France attempted to negotiate a commer- 
cial treaty in 1882. France demanded reductions of duty on wines, 
but Great Britain would neither consent to that nor agree to guar- 
antee that they would not be advanced during the life of the treaty. 
As Great Britain, however, maintains a system of free trade as 
regards almost all other imports from France, the latter extended 
to Great Britain most favored nation treatment by legislative enact- 
ment. Under that act the minimum rates of the new French tariff 
of 1892 were automatically applied to England without getting air- 
special concessions from the latter in return. 

Austria-Hungary readily accepted the French minimum tariff 
in return for its own lowest duties. No other course could be taken 
by that country, first, because it had raised its own tariff and made it 
thoroughly protective and second, because while its exports to 
France in 189T, the year preceding the adoption of the new tariff, 
exceeded $26,000,000, it imported from France only about $3,000,- 
000 worth, and therefore would be liable to lose more in the case 
of a tariff war than France. 

(482) 



The Double Tariff System 43 

Russia was in a position similar to that of Austria-Hungary. 
Its exports to France in 1891 amounted to $41,000,000, while French 
imports to Russia barely exceeded two and one-half millions. It 
therefore readily granted to France reductions in fifty-one articles 
of its tariff in return for the minimum tariff of France, but not 
until the latter agreed to make certain reductions in its minimum 
tariff in favor of Russian petroleum and vegetable oils. 

As regards the minor countries, such as Belgium, Holland, 
Sweden and Norway and Turkey, the situation was quite similar; 
that is to say, in most cases they had more to lose than to gain from 
a tariff war and being, moreover, weaker politically as well as 
commercially, it was to their interest to secure the minimum French 
tariff in return for their minimum duties. Besides, some of them 
had had most favored nation agreements with France for some 
time past. 

Now let us consider the countries which refused to accept the 
French minimum tariff as sufficient compensation for their lowest 
rates. The country which proved most intractable, going to the 
extreme of a tariff war, was Switzerland. In 1890 the exports from 
France to Switzerland amounted to nearly $47,000,000, while her 
imports from Switzerland amounted to about $20,000,000. France 
had, consequently, more at stake than Switzerland, and the smaller 
country knew how to make the best of the situation. As the new 
French minimum tariff affected Swiss articles of commerce very 
unfavorably the latter country refused to extend to France its own 
conventional tariff rates, unless France reduced several of her rates 
in the minimum tariff. 

France declared that to satisfy the Swiss demand would mean 
to upset her entire tariff system, which was based on the principle 
of autonomous regulation of her own rates. The Swiss thereupon 
not only refused to apply their minimum rates to French products, 
but raised their general rates to a prohibitive scale, subjecting 
imports from France to duties as much as 190 per cent above those 
applied to other countries. 

The tariff war lasted until 1895, causing enormous losses to 
France, her exports to Switzerland declining from $47,000,000 in 
1890 to $25,000,000 in 1894, or about one-half. Peace was not 
concluded until France agreed to waive her principle of autonomous 
regulation of her tariff and reduced her minimum rates on some 

(483) 



44 The Annals of the American Academy 

twenty-nine articles. On the other hand, Switzerland granted to 
France her minimum tariff, but refused to make special concessions 
which she had offered to make before the tariff war had broken out. 

The autonomous regulation of the tariff thus broke down 
before the decided opposition of a politically weaker nation which 
had the advantage of offering a profitable outlet for French prod- 
ucts. With the other countries, viz, Spain, Portugal, Italy, Rou- 
mania and Greece, tariff hostilities led to the application of maxi- 
mum rates on French products and vice versa, until an agreement 
could be arrived at, in each case resulting in loss of trade to 
France. 

Thus French exports to Spain declined from $35,000,000 in 
1 89 1 to $21,000,000 in 1894, or 40 per cent ; to Roumania, from nearly 
$2,000,000 to $1,500,000, or 25 per cent; to Portugal, from $4,800,- 
000 to $2,400,000, or one-half ; to Greece, from $4,500,000 to $1,250,- 
000 in 1893, or 72 per cent. 

In the case of Italy, France carried her point of making no 
reductions from her minimum tariff. But the tariff war with that 
country commenced as early as 1888, as a result of the revision of 
the Italian tariff. The treaty establishing commercial peace between 
the two nations was not ratified until the beginning of 1899, or 
eleven years from the date hostilities commenced, and more than 
seven years from the date the new French tariff went into effect, 
during which time the French exports to Italy declined from $37,- 
000,000 in 1887, the year preceding the declaration of the tariff 
war, to $19,000,000 in 1894, the lowest record during the period; 
in 1898, the year preceding the application of the minimum rates 
between the two countries, the exports were about $27,600,000. 

With the United States no agreement could be secured on the 
basis of the minimum tariff, and the agreement of May 28, 1898, 
secured partial concessions to France on argols, wines, brandies, 
paintings and statuary imported into the United States, for wdiich 
France granted in return her minimum rates on canned and pre- 
pared meats, lard, certain kinds of fruit and lumber imported from 
the United States. 

Summing up the results of the French agreements with foreign 
countries under the autonomous double tariff system, it will be seen 
that, with the exception of Italy, she was unable to obtain special 
concessions from any country with which she had any trade of 

(484) 



The Double Tariff System 45 

importance. The concessions secured from Russia were of no great 
practical value, and may be considered more in the nature of a salve 
on the political alliance between the two countries. The best France 
was able to accomplish was to obtain the minimum tariff of other 
countries in return for her own, after suffering a loss of more than 
$60,000,000 in annual exports to the countries with which satisfac- 
tory arrangements could not be made at once. 1 As most of the other 
countries had also raised their rates, the ultimate result was that 
each side retained its protective system. 

The German Conventional Tariff. 

Having learned something of the history of the French maxi- 
mum and minimum tariff, and of the use it was put to by France 
in her tariff negotiations with foreign countries, let us review in a 
similar manner the experience of Germany with her so-called con- 
ventional tariff system. Germany started on her imperial career, 
like her western neighbor on her republican career, with a very 
low customs tariff. But the same causes which were responsible 
for the agitation in favor of a protective tariff in France, soon 
became operative in Germany as well. Both in France and in Ger- 
many the farmers and landlords found their industry threatened by 
the growing competition of Ameiican grain and other agricultural 
products. But while in France the agricultural interests remained 
alone for nearly two decades in their efforts to bring about a revision 
of the tariff, they found in Germany a willing and helpful ally in 
the industrial and financial interests. 

The immense war indemnity of one billion dollars, paid by 
France to Germany at the close of the war, having filled to over- 
flowing every financial channel in the empire, stimulated the growth 
of industries, the building of railroads, the development of mining, 
and the promotion of all kinds of enterprises at a forced pace, 
resulting, in reckless speculation and an abnormal expansion of 
business activity beyond the actual needs of the people. But no 
sooner had the supply of French gold given out, than the familiar 
phenomena of industrial reaction set in. Suddenly deprived of the 
liberal credit on which so many of the industrial enterprises had 
been built up, they found themselves on the verge of ruin. As the 

J The above figure does not include the loss in trade with the United States, 
Which was due partly to the effects of the McKinley tariff. 

(48s) 



46 The Annals of the American Academy 

new industries were not in a condition to withstand the competition 
of British and French products under the circumstances, the demand 
for protective duties became quite general. The combined pressure 
of the agricultural and industrial interests was sufficient to compel 
even Bismarck to abandon his free trade policy. A bill greatly 
increasing the old rates was introduced by the Chancellor in the 
Reichstag, and enacted by that body into law in 1879. 

The new tariff must have afforded adequate protection, for the 
industrial expansion of Germany took a new start, and in an in- 
credibly short time the empire found itself transformed from an 
agricultural into a modern industrial state, not only capable of 
supplying the domestic needs, but competing in foreign markets 
with the countries on which it hitherto depended for its own 
supplies. 

This expansion of the foreign trade of Germany was stimu- 
lated by an unusual combination of favorable conditions, viz, the 
protective tariff at home and the absence of similar tariffs in the 
principal markets of Europe. This enabled the German manufac- 
turer to sell his goods in the home market at very remunerative 
prices, and to dispose of his surplus abroad with great ease. The 
reason for the absence of similar tariff laws abroad has been partly 
explained in speaking of France. France had her hands tied by 
the commercial treaties which were to remain in force until 1892. 
The other European nations were likewise bound to retain their 
low rates of duty by their reciprocity treaties with France and with 
each other, and under their most favored nation treaties with Ger- 
many were obliged to extend the same liberal treatment to German 
products. 

The feeling against Germany, however, became so pronounced 
toward the end of the eighties that it became evident to her states- 
men that the German export trade would have to face a radical 
change for the worse in the near future. France announced her 
intention to terminate her treaties in 1891, arid to inaugurate a new 
tariff policy. Other European nations prepared to follow suit. The 
German manufacturers became alarmed at the prospect of losing 
their foreign markets, and clamored for action by the government 
to avert the calamity. In looking for a way out of the difficulty 
and in sounding the feeling of influential spheres in foreign coun- 
tries, it became apparent to the German Government that no relief 

(486) 



The Double Tariff System 47 

could be attained abroad without making corresponding concessions 
at home. This the German manufacturers were willing to do. 
Under the protection they had enjoyed for twelve years the German 
industries attained sufficient strength to hold their own against all 
comers without further assistance from the state. What they needed 
was the aid of the government in preventing the erection of tariff 
walls abroad. Germany now opened negotiations with foreign 
countries looking to the conclusion of reciprocity treaties. On 
December 10, 189 1, the commercial treaties with Austria-Hungary, 
Belgium and Italy were laid before the Reichstag by Chancellor 
Caprivi. Treaties with other nations soon followed. 

In negotiating these treaties the German Government used the 
tariff of 1879 as a basis f° r bargaining, and reduced the rates on a 
large number of articles, the reductions ranging from ten to seventy- 
five per cent, the bulk being near twenty-five per cent. In addition 
to these reductions of duty Germany agreed to "bind" several of 
the rates which she refused to reduce, that is to say, she agreed not 
to advance them during the life of the treaties negotiated. The 
treaties were concluded for a term of twelve years. In return for 
these concessions Germany obtained reciprocal advantages for her 
trade in the markets of those countries, which not only prevented 
the danger of upward revisions of those tariffs for twelve years to 
come, but insured much lower rates of duty on German products, 
that is to say, even more favorable conditions than her exporters 
had enjoyed hitherto. 

How advantageous the policy of long term commercial treaties 
proved may be seen from the fact that upon the expiration of those 
treaties, at the end of the year 1903, negotiations were opened for 
the conclusion of new treaties, which went into effect in March, 
1906, to remain in force until the close of 1917, i. e., for another 
twelve years. 

The first set of treaties included only seven nations — Austria- 
Hungary, Russia, Italy, Switzerland, Belgium, Roumania and Ser- 
via. The new treaties include all of the above countries, and in 
addition Sweden, Bulgaria and Greece. Negotiations are, further-, 
more, in progress or in contemplation with the United States, Spain, 
Denmark, Canada and some of the South American republics. The 
enlargement of the sphere covered by the German treaties is in 
itself a sufficient indication of the advantage derived by Germany 

(487) 



48 The Annals of the American Academy 

from that policy, but the same is also true of the countries with 
which she had concluded commercial treaties. In the case of several 
of those countries the reciprocity treaty with Germany was their 
first experience in that field ; — all of them to-day have supplemented 
their new commercial treaty with Germany by a series of similar 
treaties with each other, so that to-day Europe is covered by a net- 
work of those treaties which, in their aggregate, affect the customs 
rate of nearly every article entering international trade. 

The Relative Merits of the Tzvo Double Tariff Systems. 

Let us see what conclusions we can draw from the experience 
of France and Germany with their respective double tariff systems. 

Either system is an advance on the old single tariff system, 
being designed to protect the country on two fronts, so to speak, by 
taking care not only of the markets at home, but also of the home 
interests in foreign markets. Under either system the general tariff 
— commonly, though erroneously, called maximum in this country — 
is enacted by the parliament and applied to countries which fail to 
treat the products of that nation as favorably as they do those of 
other nations. The difference arises in connection with the appli- 
cation of the lower rates called minimum in the French system and 
conventional in the German. 

The chief advantage of a maximum and minimum tariff system 
claimed for it by its advocates is that it secures national autonomy 
in the working out of the tariff schedules. By determining in ad- 
vance what shall be the minimum rate of duty on any article of 
commerce, the legislative body is able to accord to each industry 
what it considers to be the indispensable degree of protection. The 
foreigner is at the outset deprived of any voice in the matter, and 
has no opportunity of influencing national legislation from the point 
of view of his interests. On the other hand, by providing a set of 
maximum duties much higher than the minimum, a club is held 
over the foreigner, to keep him from retaliating in kind. 

As has been shown in the case of France, the policy succeeds 
well as regards countries which are less favorably situated than 
the country adopting the policy. When, however, the other country, 
as was the case with Switzerland, has the commercial advantage, it 
can compel even a stronger opponent, as France undoubtedly was, 

(488) 



The Double Tariff System 49 

to yield in the end. The concession made by France on that occa- 
sion was important, not only as measured in dollars and cents, but 
also in that it signified the surrender of the principle of autonomous 
regulation of the tariff, the French having reduced their rates below 
the minimum originally set by the French parliament. 

Nor has France been alone among countries which have tried 
unsuccessfully to maintain the principle of autonomy through a 
double tariff system. Russia was compelled to reduce her minimum 
rates in her negotiations with France as well as with Germany, after 
going through a tariff war with the latter on that account. Spain 
and Greece also had to reduce their minimum rates to obtain con- 
cessions from other countries. 

Lack of elasticity is the fault found with the double tariff system 
by those who prefer it to a system of general and conventional rates 
— that is, one in which the minimum rates are determined by reci- 
procity treaties or "conventions," as they are called in Europe. In 
the case of the double tariff of the French pattern, a country offers 
foreign nations the choice of either set. They are asked to "take 
or leave it," and if dissatisfied with the terms, their products are 
subjected to the general or even special war rates. Such, as we 
have seen, was the experience of France with Switzerland, Italy, 
Spain, Portugal, Roumania and Greece, with resultant loss to her 
foreign trade. 

On the other hand, a system based on reciprocity is not only 
elastic in the sense indicated above, but may prove more advan- 
tageous in the end, in that it does not compel the negotiators to 
show their hand from the start. This is shown by the experience 
of Germany, whose negotiators in concluding reciprocity treaties, 
were able to bargain with a free hand, subject to the approval of 
the legislative body, after the negotiations had been concluded. 

True, Germany did not escape a tariff war (with Russia) when 
negotiations failed, but that was rather because Russia insisted on 
her prearranged minimum, and when the war was over, it was 
Russia and not Germany which had to give up the principle it con- 
tended for. 

So much for the rates of the country which adopts the double 
tariff. When it comes to the other side of the bargain, namely, the 
rates to be obtained from the other country, the difference between 
the two methods is even more striking. 



50 The Annals of the American Academy 

In a system of reciprocity treaties, each side comes prepared 
to ask for reductions in rates of duty on those products in which 
it is particularly interested. As a rule, it is found that each country 
is interested in a comparatively small number of articles which it 
can successfully sell to the other. Let us illustrate this by example : 
Let A be a country with a flourishing export trade in manufactures 
of iron, steel, coal and cotton textiles; B, in wines, liquors, fruits, 
finer textiles, such as silk, velvet, lace and embroidery ; C, in cereals, 
cattle and other agricultural products. Under a system of reci- 
procity treaties of the German type, each will adopt a general tariff 
with duties fixed on a protective basis, or even higher, then, in 
negotiations for mutual concessions, A will try to obtain from B 
and C lower rates on its iron and steel products, coal and cotton 
textiles, and in turn will grant reductions to B in import rates 
on wines, liquors, fruits and fine textiles ; and to C, on cereals and 
other agricultural products. Each country will bargain and try 
to make the least concession and to obtain the most favorable terms 
for its own products until they will reach a common ground and 
compromise on certain rates. As each will have a say not only as to 
the concessions it is to make, but also as to those it is desirous to 
obtain from the other, the chances of a successful conclusion of the 
negotiations by a series of "give and take" steps are quite favorable. 

Under the French system, countries A, B and C would set up 
a double set of duties, all definitely fixed and proclaimed by their 
parliaments before their respective negotiators got together. As 
the minimum tariff must contain the sum total of the concessions 
which a given country is willing to make to the rest of the family 
of nations, the negotiators of A, B and C would each come armed 
with a prearranged set of concessions, most of which may not be 
of interest to the other two, while the articles that B and C are 
mostly interested in may either not be covered at all in A's minimum 
tariff or sit any rate, not to their satisfaction. Since the repre- 
sentatives of the respective countries are powerless to make any 
concessions beyond those fixed in their minimum tariffs, they are 
reduced to the choice of accepting or rejecting each other's pre- 
determined minimum in exchange for their own, as an alternative 
to a tariff war. The only limit to the maximum rates of each coun- 
try is its own sense of danger to the interests of its citizens, in so 
far as they are dependent on the foreign product. Such was f he 

(490) 



The Double Tariff System 51 

case, for example, with Italy when it abolished its war duties on 
French products and accepted France's somewhat harsh terms. 

The universal application of a rigid double tariff system would 
neutralize its efficiency and practically bring all nations back to the 
position they were in when each applied a single protective tariff 
to all foreign imports. 

Even in the case of apparent success of a maximum and mini- 
mum tariff, the success may often prove to be only half as great as 
in that of a conventional or reciprocity tariff. This may be best 
explained by citing recent tariff history. 

When Germany adopted the reciprocity policy in 1891, it 
negotiated reciprocity treaties with seven countries, from each of 
which it obtained concessions on those products which constituted 
important items in the German export trade. Thus, Italy reduced 
her rates of duty on 254 articles in favor of Germany ; Switzerland 
on 293 out of a total of 476 articles in the Swiss tariff, etc. Ger- 
many had thus a direct influence in shaping the tariffs of those 
countries, and in return allowed them to exert a similar influence 
on her tariff. 

On the other hand, when France succeeded in inducing some 
of those countries to grant her their minimum rates in return for 
her minimum tariff, it had to be satisfied mostly with the rates 
that had been determined upon in the course of the negotiations of 
those countries with Germany and other countries. In so far as 
France could export the same products as the latter it had the same 
advantage. But as regards purely French products, in which 
Germany naturally was not interested and therefore had no reason 
to secure lower rates from those countries, France had to be satis- 
fied with such rates as the foreign tariffs provided. 

To take an example nearer home : In expressing a solicitude 
as to the fate of the United States exports to Germany under the 
new tariff system, neither "stand-patters" nor "revisionists" have 
gone beyond voicing the demand that the United States products 
be admitted under the conventional rates of duty accorded to 
the nations with which Germany has concluded tariff treaties. Yet, 
in the list of articles covered by the Germany reciprocity treaties 
with those countries, several articles of great importance to our 
trade are conspicuous by their absence, for the simple reason that 
the other countries were not interested in them. Reductions of 

(49i) 



52 The Annals of the American Academy 

rates for such articles are generally obtained, if at all, through 
special negotiations involving reciprocal concessions. 2 

Stability. — Another very important consideration with the ad- 
vocates of the French system is that it leaves the government free 
to change the rates at any time when circumstances and changed 
industrial conditions make such a step necessary. All that the 
government binds itself to do with regard to a foreign country is 
to accord to it its minimum tariff. It reserves the right, however, 
of changing the minimum tariff whenever and in whatever way it 
sees fit. 

Under the system of conventional or reciprocity tariff, the con- 
tracting powers specify the exact rates to be respectively applied 
to each other's products, and such rates cannot be raised during 
the life of the treaty. Admitting this contention, the advocates of 
the conventional tariff system claim that it offers great advantages, 
which more than counterbalance the disadvantage in question, in 
that- it insures stability and certainty for the commercial interests. 
Under the German tariff treaties of 1891, practically no changes 
in the tariff occurred in fourteen years, and the manufacturing and 
exporting interests were able to calculate conditions and direct theiv 
investments with perfect safety. The new tariff which went into 
effect March 1, 1906, likewise binds the conventional rates of the 
German tariff until the close of the year 19 17. At the same time 
it binds the rates of the countries with which treaties have been 
concluded in a similar manner. As a result of this, the German 
manufacturer not only knows what degree of protection his goods 
will enjoy in the home market for the next twelve years, but he and 
the exporter know also that for twelve years to come they can do 
business in those foreign countries under conditions which cannot 
be changed for the worse, so far as the tariff is concerned, and "an 
therefore estimate their prices and take long time contracts without 
fear of having their calculations upset by unexpected changes in 
the tariffs of those countries as well as of his own country. 

One of the dangers of the double tariff is that it is a double- 
edged weapon, and in case of failure of negotiations, the maximum 
tariff may prove excessively burdensome to the people of the coun- 

2 For a more detailed account of the commercial and tariff relations between 
Germany and the United States, see articles by the present writer in the North 
American ReVdetC for .March and September, 1905, and March, 1000. 

(402) 



The Double Tariff System 53 

try which makes use of it as a weapon against others. The danger 
is especially great when the supply of the article affected by the 
maximum rate happens to be largely or exclusively concentrated 
in the country against which that rate is directed. In this respect 
the United States is in a fortunate position as compared with other 
nations. There are few, if any, articles of importance in our import 
trade for which we largely depend upon a single nation and which 
we could not get elsewhere if, through a tariff war, we had shut 
out the country on which we had mainly drawn for our supplies. 
On the other hand, we export many a valuable product of which 
we hold either a complete monopoly or nearly so. Cotton is an 
illustration of the former, petroleum and copper of the latter. While 
we have no monopoly of production either of copper or petroleum, 
the total world supply of these products is so limited as compared 
with the demand, that if any nation were to shut us out of its 
markets, we would have no difficulty in disposing of our surplus in 
other markets which, for the time being, would no longer be sup- 
plied by our competitors, whose supply would go to meet the de- 
mand of the country with which we were at war. 

Conclusion. 

The respective merits of the two double tariff systems must 
in the ultimate analysis be determined by the test which is applicable 
to any economic policy, namely, the success attending their practical 
application. Judged by that standard, the German system seems to 
be gaining ascendancy over the French. 

The French system found four imitators: Spain (which really 
was the first to inaugurate it), Russia, Greece and, in a modified 
form, Norway. All of these countries, except Norway, have been 
obliged to compromise on the fundamental principle in their system, 
viz, the autonomous regulation of the minimum rates, and to go 
below their minimum tariffs in order to obtain desired concessions 
from other countries. 

Russia, which had started out with a maximum and minimum 
tariff in 1893, was obliged to reduce her minimum rates after going 
through a disastrous tariff war with Germany in her attempt to 
maintain the integrity of her minimum tariff. As a result of her 
experience, she abandoned the maximum and minimum tariff en- 
tirely upon the expiration of the treaties based upon that tariff, and 

(493) 



54 The Annals of the American Academy 

in 1903 adopted a new general tariff which served as a basis in the 
negotiation of new commercial treaties for a conventional tariff 
of the German type. 

Norway applies her minimum tariff to all countries which do 
not discriminate against her products. This secures for her the 
minimum rates of foreign countries, and keeps her out of tariff wars, 
but deprives her of an opportunity of securing special reductions 
for her own products such as Germany and the countries following 
her policy are able to obtain. 

Canada has just adopted a maximum and minimum tariff but 
so far applies her maximum tariff to all foreign countries, and 
whether she will fare better than France and Russia in her future 
negotiations with foreign countries and be able to retain her mini- 
mum tariff in its integrity remains to be seen. 

On the other hand the system of conventional tariffs based on 
treaties of reciprocity is now in vogue in the following countries: 
Germany, Austria-Hungary, Russia, Italy, Switzerland, Belgium, 
Roumania, Servia, Bulgaria. Sweden has also concluded a com- 
mercial treaty with Germany, but has not followed it up with other 
treaties because she contemplates a revision of her tariff in 191 1. 
Denmark and Holland are contemplating the adoption of the con- 
ventional tariff. 

The experience of the foreign countries thus seems to point 
to the general and conventional tariff system as the more adequate 
of the two. 

What conclusion are we warranted in drawing from foreign 
experience with reference to the United States? The answer to 
that must be predicated upon the special political and economic 
conditions prevailing in this country. 

In no country in the world does the ratification of a treaty 
meet with so many difficulties as in the United States. It is doubt- 
ful whether the history of any other nation abounds with so many 
instances of treaties failing of ratification by parliament after they 
have received the sanction of the Executive. The treaty-making 
power is vested in that branch of our legislative body which is the 
slowest to change in the composition of its membership, and there- 
fore less influenced by public opinion and by the changing attitude 
<>f the times. Added to this is the constitutional provision that 
requires a majority of at least two-thirds of the vote of the Senate 

(494) 



The Double Tariff System 55 

for the ratification of a treaty. While these conditions apply to all 
treaties, a reciprocity treaty affecting the rates of customs duty 
would in addition require the consent of the House of Repre- 
sentatives. 

Compare with this the situation in Germany. The treaty 
having been negotiated by the government is introduced in the 
Reichstag and a simple majority — be it of one vote only — is suffi- 
cient to ratify the treaty. There is only one house in which it is 
considered, a house whose members are as responsible and re- 
sponsive to the wishes of their constituents as the members of our 
House of Representatives are to theirs. 

Under our democratic form of government and with Congress 
very jealous of its powers of controlling the revenue of the country, 
no administration which cares for the success of its policy is likely 
to venture upon the conclusion of reciprocity treaties involving a 
substantial reduction of duties unless it has good reasons to expect 
its ratification by Congress. If it should the probabilities of more or 
less numerous changes being made in the treaty while under con- 
sideration by Congress would be very great; as in most instances 
this would be equivalent to a rejection of the treaty in the form 
negotiated by the administration, the difficulties in the way of a 
successful negotiation of reciprocity treaties of the German type 
seem very great. 

But the adoption of the French system would prove no better 
suited to our political conditions than the German. If treaties were 
to be negotiated on the basis of a minimum tariff previously adopted 
by Congress they would still require a two-thirds majority vote of 
the Senate and be exposed to the dangers described above. If 
Congress were merely to authorize the President to extend our 
minimum tariff to all countries which grant us their minimum rates, 
such action would undoubtedly secure to us the existing minimum 
rates of every nation in the world but would involve on our part 
the voluntary surrender of the pow T er to secure from various nations 
concessions for that part of the $700,000,000 worth of our annual 
exports of manufactured products for which there happen to be no 
conventional or minimum rates in the tariffs of other countries. Yet 
that is one of the most important ends to be had in view in shaping 
our new tariff policy. 

There is a way to overcome both of these difficulties ; a way 

(495) 



56 The Annals of the American Academy 

which bids fair to combine the advantages of the French and the 
German system ; one that is based on a principle already sanctioned 
by Congress, and the constitutionality of which has been sustained 
by the Supreme Court of the United States. The principle in ques- 
tion underlies section 3 of the Dingley Act, which provides: 

That for the purpose of equalizing the trade of the United States with 
foreign countries . . . the President be, . . . authorized ... to 
enter into negotiations with the government of those countries . . . with 
a view to the arrangement of commercial agreements in which reciprocal and 
equivalent concessions may be secured in favor of the products and manu- 
factures of the United States, . . . and whenever the government of any 
country or colony shall enter into a commercial agreement with the United 
States, or make concessions in favor of the products or manufactures thereof, 
which, in the judgment of the President, shall be reciprocal and equivalent, 
he shall be, and he is hereby authorized and empowered to suspend, during the 
time of such agreement or concession, by proclamation to that effect, the 
imposition and collection of the duties mentioned in this act, on such article 
or articles so exported to the United States from such country or colony, 
and thereupon and thereafter the duties levied, collected, and paid upon 
such article or articles shall be as follows, namely: 

On the basis of that section we enjoy to-day the benefit of 
reduced rates of duty in France (only partially), Germany, Italy, 
Portugal, Spain, Switzerland and Bulgaria. The list of articles on 
which the President is authorized to make reductions of duty is 
however very limited including only argols, brandies, wines, paint- 
ings and statuary. 

If section 3 were enlarged by an act of Congress so as to 
include a considerable variety of articles sufficient to make it of 
interest to countries of different climes and products, or if a hori- 
zontal reduction on the entire tariff list were authorized under 
section 3 similar, in principle, to that provided by section 4, which 
has since expired by limitation, it would enable the Executive to 
negotiate agreements of far-reaching value to the United States, 
without requiring their ratification by Congress. 

An extension of the scope of section 3 would thus enable us 
to reap all the advantages inherent in the system of reciprocity 
treaties. The President being authorized to vary the concessions 
to different countries within the limits set, in accordance with the 
reciprocal concessions secured, our tariff system would be given 
the necessary flexibility which has stood Germanv in good stead. 

(496) 



The Double Tariff System 57 

At the same time Congress having set a limit to the reductions of 
rates to be granted by the Executive, it would fully preserve its 
constitutional prerogative of controlling the revenue of the coun- 
try, and thereby secure whatever advantages inure to the maximum 
and minimum tariff system. The enactment of such a provision of 
Congress would, however, be easier to effect than the ratification 
of a series of treaties, since it would require but a simple majority 
in each house of Congress, and, once enacted, would authorize the 
conclusion of all subsequent agreements negotiated by the Presi- 
dent. 

The writer has endeavored to present an impartial review of 
the salient features of the various tariff systems now in operation 
among the most advanced nations of the world. This article has 
been written not with a view to advocate a certain policy, but in 
order to bring out the salient facts, a knowledge of which is indis- 
pensable for an intelligent discussion of a problem, the correct and 
early solution of which is of immense import to the welfare of this 
country. 



TARIFF PROVISIONS FOR PROMOTION OF FOREIGN 
TRADE OF THE UNITED STATES 



By G. G. Huebner, 

Harrison Fellow in Transportation and Commerce, University of Pennsyl- 
vania, Philadelphia. 



The present agitation in favor of tariff revision is based pri- 
marily upon the necessity of increasing the foreign market for the 
American surplus. First, there is a growing surplus of manufac- 
tured products which is obliged to seek a greater market in South 
America, Oceanica, Africa, foreign North America and the non- 
manufacturing countries of Europe. Second, there is a surplus of 
agricultural produce which has greater difficulty than formerly in 
finding a foreign market. Third, the task of the American exporter 
has become greater because of the increasing foreign competition, 
and the almost universal tendency of foreign nations toward greater 
stringency in tariff legislation. 

The tariff question to-day is pre-eminently a matter of foreign 
commerce. Consequently it is of practical interest to analyse those 
provisions which were inserted into the tariff laws of the United 
States for the purpose of promoting foreign commerce, and to 
determine their relative importance. An examination of the sec- 
tion relating to foreign commerce in the various tariffs of the United 
States [Table I] will show that such provisions may be divided 
into (i) those designed to promote the Oriental trade, (2) shipping 
protection, (3) shipping reciprocity, (4) reciprocity treaties and 
agreements, and (5) miscellaneous provisions. 

Table I. 
Tariff Provisions Intended to Promote Foreign Commerce. 

Year. Provision. 

July, 1789* Sec. 1. — Reduced duty on tea from India and China in 

American vessels. 
Sec. 4.— Ten per cent discount on imports in American 
vessels. 

August, 1790 Sec. 1. — Reduced duty on tea from India and China in 

American vessels. 
Sec. 2. — Ten per cent discount on imports in American 
vessels. 

(498) 



Provisions for Promotion of Foreign Trade 59 

Year. Provision. 

March, 1791* Sec. 4. — Bounty on dried and pickled fish and salted pro- 
visions. 

May, 1792* Sec. 5. — Ten per cent discount on imports in American 

vessels. 

June, 1794* Sec. 4. — Ten per cent increase on imports in foreign ves- 
sels. 

January, 1795*. . . . Sec. 5. — Ibid, 

March, T797* Sec. 3. — Ibid. 

July, 1787* 

May, 1800* Sec. 3.— Ibid. 

March, 1804* Sec. 3. — Ibid. 

March, 1804* Sec. 3.— Ibid. 

Sec. 6. — Tonnage duty of 50 cents ("light money") on 
foreign vessels. 

March, 1805 Sec. 1. — Sec. 6 of May, 1804, defined. 

July, 1812* Sec. 2. — Ten per cent increase on imports in foreign ves- 
sels. 
Sec. 3. — Light money increased to $1.50. 

January, 1813 Sec. 2. — Ten per cent increase on imports in foreign ves- 
sels. 

March, 1815! Sec. 1. — Ten per cent discrimination repealed in direct 

trade with nations granting reciprocal privi- 
leges. 

February, 1816*. . . 

April, 1816* Sec. 3. — Ten per cent increase on imports in foreign ves- 
sels except where otherwise provided by law 
or treaty. 

January, 1817"!". . . . Sec. 2. — Tonnage duty of $2 against vessels of nations 

barring American vessels. 

April. 1818. ...... Sec. 24. — Export bonding regulations. 

April, i8i8*t 

March, 18194: 

April, 1820* 

May, 1820 Sec. 1. — Tonnage duty of $18 on French vessels. 

May, 1822! Sec. 1. — President to negotiate relative to shipping in the 

British West India trade. 
Sec. 2. — French tonnage discrimination to be suspended 
upon suitable arrangements by the President. 

March, 1823 Sec. 1-4. — French tonnage discriminations suspended. 

January, 1824! Sec. 4. — President may grant reciprocal tonnage favors to 

certain nations. 

May, 1824$ 

May, l828*t. Sec. 1. — Ten oer cent discrimination repealed in indirect 

trade with nations granting reciprocal privi- 
leges. 

May, 1830* 

July, i832t Sec. 3. — Further extension of reciprocal tonnage favors. 

July, 1832*? Sec. 3. — Eastern teas and various tropical goods in Amer- 
ican vessels on free list. 

September, T841*. . 

August, 1842*$.. Sec. 9. — Ibid. 

Sec. 11. — Ten per cent discrimination against foreign ves- 
sels in Eastern trade. 

July, 1846* Sched. I. — Coffee and tea on free list in American or for- 
eign vessels entitled to reciprocity. 

May, 1848 Sec. 1. — Coast vessels may do a limited foreign trade. 

November, 1855 ..Canadian Reciprocity Treaty. 

(499) 



60 The Annals of the American Academy 

Year. Provision. 

March, 1857 Sec. 3. — Sched. I of July, 1846, 011 tea and coffee re- 
enacted. 

March, 1861* Sec. 23. — Ibid. 

Sec. 27. — Re-export bonding of railroad iron. 

August, i86u Sec. 4. — Ninety per cent re-export drawback. 

July, 1862 Sec. 14. — Ten per cent additional duty on eastern cargoes 

shipped from west of Good Hope. 

March, 1863* Sec. I. — Bonding regulations. 

Sec. 2. — Sec. 14 of July, 1862, suspended. 

January, 1864 Commercial treaty with Japan. 

June, 1864$ Sec. 18. — Sec. 14 of July, 1862, re-enacted, except on cer- 
tain goods 
July, 1866 Sec. 2. — Vessels in Hawaiian trade pay tonnage once an- 
nually. 
February, 1867 . . . Commercial treaty with Madagascar. 

May, 1871 Treaty with Great Britain and Canada. 

June, 1872* 

October, 1872 Sec. 1. — Shipping reciprocity with France in indirect trade 

suspended. 

March, 1873 Sec. 1. — Fish oil, fish, etc., admitted free from Canada. 

Sec. 3-4. — Regulation of Canadian transit trade. 
February, 1873.... Sec. 1. — Act of October, 1872, relative to French vessels 

annulled. 
September, 1876. .Hawaiian Reciprocity Treaty. 

May, 1882 Sec. 1. — Discrimination on eastern goods from west of 

Good Hope removed. 
December, 1882... Sec. 1. — Discrimination on eastern goods from west of 

Good Hope reimposed, except on cotton and silk. 
March, 1883* t .... Sec. 2497. — No imports from nations barring American 

vessels, except in American or foreign vessels 
entitled to reciprocity. 

June, 1884* 

1884 Tonnage Act. 

1886 Tonnage Act amended, 

November, 1887. .. Hawaiian Reciprocity Treaty renewed. 
October, 1890:;: § . . . McKinley Act : 

Sec. 3. — Reciprocity provision. 

Sec. 15-16. — Free lumber from St. John and St. Croix 

Rivers. 
Sec. 18-19. — Sec. 2497 of March, 1883, re-enacted. 
Sec. 25. — Ninety-nine per cent re-export drawback. 
December, 1890... Sec. 1. — Rebate on tobacco in certain instances. 

March, 1891 McKinley Act not to impair Hawaiian Treaty. 

July, 1892 An act to enforce the Canadian treaty. 

August, 1892 Sec. 1. — Retaliatory measure to enforce Canadian treaty. 

August, 1894? Wilson Act : 

Sec. 7. — Articles for building ships in foreign trade free. 
Sec. 8. — Articles for repairing ships in foreign trade free. 
Sec. 9. — Regulations for bonding cargoes. 
Sec. 15.— Sec. 2497 of March, 1883, re-enacted. 
Sec. 22. — Ninety-nine per cent re-export drawback. 

July, i897'l§ Dingley Act : 

Sec. 3. — Reciprocity agreements. 

Sec. 4. — Reciprocity treaties. 

Sec. 1 2. — Sec. 7 of Wilson Act renewed. 

Sec. 13.— Sec. 8 of Wilson Act renewed. 

(500) 



Provisions for Promotion of Foreign Trade 61 

Year. Provision. 

Sec. 15-16. — Regulations for bonding cargoes. 
Sec. 20-21. — Provisions as to St. John and St. Croix lum- 
ber. 
Sec. 30. — Ninety-nine per cent re-export drawback. 
Sec. 491. — Binding twine not on free list if the American 

product is charged a duty. 
Sec. 626. — Petroleum not on free list if the American 

product is charged a duty. 
Sec. 675. — Sulphuric acid not on free list if the American 
product is charged a duty. 
July, 1897 Sec. 1.— Partial shipping reciprocity may be granted in re- 
turn for partial shipping rights. 
December, 190;; . . . Cuban Reciprocity Treaty. 

♦Re-export drawbacks on certain articles under prescribed regulations. 
jFor application of this law to different nations, see Table II. 
tTen per cent discrimination against foreign vessels, except where otherwise 
provided by law or treaty. 

§For application of reciprocity provisions, see Table III. 



The Oriental Trade. — Immediately after the Revolutionary War 
there began a period of brisk foreign commerce, in which the 
American merchants sought to trade direct with markets formerly 
reached through Great Britain and Europe. In 1784 1 the direct trade 
with China commenced, and at about the same time American East- 
Indiamen began their first voyages. 2 In 1789, with the first tariff 
law enacted by the national government, began a series of provisions 
which so stimulated this Oriental trade as to make it an important 
factor throughout the early commercial life of America. 3 This law 
imposed a duty on tea direct from India and China, in American 
vessels, ranging from 6 to 20 cents per pound ; but on tea from 
Europe the duty ranged from 8 to 26 cents, and on tea in foreign 
vessels from 15 to 45 cents per pound. Likewise, all other Oriental 
products imported in foreign vessels were obliged to pay a duty 
or 12.5 per cent ad valorem, or almost twice the rate levied on 
imports in American vessels. Even as late as 1830 provisions 
similar to these were re-enacted in subsequent tariff laws. 

Largely because of these tariff provisions, the Oriental trade 
rapidly became an important factor in the commerce of Salem. 
Boston, New York, Providence, Philadelphia and Baltimore. It 
resulted in the establishment of various manufacturing industries, 

1 U. S. Monthly Summary of Commerce and Finance, June, 1901. 

2 Pitkin's Statistics, p. 185. 

'Marvin, American Merchant Marine, p. 40. 

(50I) 



62 The Annals of the American Academy 

such as silk spinning and finishing and the production of morocco 
leather, 4 and "laid the foundation of those great fortunes which 
constitute the origin of the wealth of so many of the older New 
England families." 5 The favorable tariffs were taken advantage 
of especially by the Massachusetts merchants, who "brought back 
immense quantities of tea, spices, sugar, coffee, silks, nankeen and 
other cloths, — all of them of great value in proportion to their bulk 
and therefore yielding heavy profits in the carrying trade ; and 
whatever did not find a market at home was reshipped from New 
England ports and sold at Hamburg or Northern Europe. It may 
be said that the marked commercial feature of the period was the 
development of this trade." 

The intent of these laws was (i) to increase the trade with the 
East; (2) to confine it to American vessels; and both of these aims 
were successfully effected. But the importance of this legislation 
from the standpoint of modern tariff revision is considerably 
dimmed by the difference in commercial needs. The demand 
throughout this early trading was for the direct importation of 
Oriental products ; while the demand to-day, as regards the Far 
East, is for the development of a vast market for the growing 
American surplus. 

Protection to Shipping. — The second group of tariff provisions 
which was an appreciable factor during the early growth of Amer- 
ican foreign commerce provided for protection to American ship- 
ping. Under the law of 1789 imports in American vessels received 
a discount of 10 per cent below the general tariff rates. In 1794, 
however, this was changed so that imports in foreign vessels were 
obliged to pay an increase of 10 per cent. In this form, the pro- 
tection to shipping was maintained until 181 5, when its "outer 
garments" were removed by the introduction of shipping reciprocity 
in the direct trade with foreign nations, and it was still further 
weakened in 1828 when the President was authorized to suspend it 
also in the indirect trade with all nations which would reciprocate. 
Thereafter, the 10 per cent discrimination against foreign vessels 
was repeatedly re-enacted in practically all subsequent tariff laws of 
importance and it appears even in the Dingley act, but after 1828 

♦Report of Sec. Chase, p. 3. r >. 

"Soley, Marine industries of America. 

'Ibid. 

(502) 



Provisions for Promotion of Foreign Trade 63 

the provision applies only to those foreign vessels which by law or 
treaty are not entitled to shipping reciprocity. 

In the early tariff laws, American shipping was further pro- 
tected by discriminatory tonnage duties. The law of 1804 levied 
a "light money'' tax of 50 cents per ton on foreign vessels, and in 
1812 this was increased to $1.50. The identical law of 1815, how- 
ever, which was above mentioned, sounded also the death knell of 
this form of shipping protection in the direct foreign trade. Though 
in exceptional instances discriminating tonnage duties were there- 
after increased, reciprocity steadily gained ground. In 1817 tonnage 
duties were further increased in the case of nations barring American 
vessels, and occasionally exorbitant taxes were imposed upon ves- 
sels of particular nations, such as the duty of $18 against French 
vessels in 1820, but their intent was to enforce shipping reciprocity 
and not to protect American vessels. As in the case of discriminat- 
ing tariffs on commodities, so provision was made in 1828 for the 
removal of discriminating tonnage duties in all foreign trade, in- 
direct as well as direct. Finally, in 1832, the President was given 
definite authority to reciprocate in the matter of hostile tonnage 
duties. The present law, passed in 1884 and amended in 1886, 
imposes a duty of three cents per ton — but not exceeding fifteen 
cents annually — upon all vessels entering from foreign ports of 
North America, Central and South America, the West Indies and 
the Bahamas, and of six cents per ton — but not exceeding thirty 
cents annually — upon vessels from the ports of other nations. It 
further provides that the President shall suspend so much of this 
duty as may be in excess of the duty imposed upon American vessels 
in any given port. 

The effect of protection to American shipping was decidedly 
stimulating. In 1789 the American merchant marine carried 17.5 
per cent of the imports and 30 per cent of the exports ; five years 
later these proportions were 90 and 88 per cent, respectively. The 
importance of the American merchant marine increased until the 
War of 1812, when all trade declined; but by 1820 it again carried 
90 per cent of the imports and 80 per cent of the exports. Though 
the absolute tonnage of American vessels engaged in the foreign 
trade reached its climax in 1861, with a total of 2,496,894 tons, 
their relative position began to decline in the later 30's. In 1905 
the absolute tonnage of the American merchant marine was 954,513, 

(503) 



64 The Annals of the American Academy 

and it carried but 14.3 per cent of the imports and 7.5 per cent of 
the exports. 7 

The remarkable growth of the merchant marine during the 
period of shipping protection was due partly to the natural advan- 
tages for ship-building and its later decline largely to the disap- 
pearance of these advantages with the advance of steam navigation, 
the use of steel in the ship-building industry and the rise of more 
profitable fields for the investment of American capital. But the 
stimulating influence of shipping protection was clearly recognized. 

Shipping Reciprocity. — As was noted above the first blow to 
shipping protection was delivered in 181 5, when provision was 
made to remove it in the direct trade with foreign nations, and the 
second in 1828, when similar provision was made for the indirect 
trade. Although the effect of this liberal legislation was disastrous 
to American shipping, its intent was to promote both the shipping 
industry and foreign commerce. The belief was prevalent that the 
American merchant marine was then so firmly entrenched that, if 
shipping reciprocity were established with foreign nations it would 
destroy foreign shipping in the American trade. 8 It was held that 
as long as American tariffs granted protection to shipping, foreign 
nations would continue to levy hostile tariffs against American 
vessels and prevent their successful competition. In 1828 Senator 
Levi Woodbury, of New Hampshire, for example, said : "By this 
bill we now hold out the olive branch to all. If our terms are 
accepted, we may obtain most of the transportation now enjoyed 
by foreigners in the eight or ten hundredths of our foreign ton- 
nage ; as they are now enabled to compete with us to that extent, 
chiefly by the discrimination they enjoy at home." 9 

The extension of the provisions for shipping reciprocity with 
the various foreign nations is indicated in Table II. 

At various times reciprocity was suspended to favor particular 
nations, but only temporarily, and for the purpose of further re- 
moving foreign restrictions against American vessels. For example, 
in 1872 it was suspended in the case of French vessels in the indirect 
trade, but after France had removed her discriminations it was at 
once re-enacted. 

7 U. S. Commerce and Navigation Reports. Per cents for 1904. 
SBates, p. 118. 

''In Soley, The Maritime Industries of America, p. 540 of Shaler's Hist, of the 
U. S., Vol. I. 

(504) 



Provisions for Promotion of Foreign Trade 



65 



Table II. 
Extension of Shipping Reciprocity. 10 



Nation. Year. 

Partial Reciprocity. 

Great Britain 1816 

Holland 1817 

Norway-Sweden 1818 

France 1823 

Holland, Prussia, Lubec, 
Hamburg, Bremen, Nor- 
way, Oldenburg, Sardinia, 

Russia, Denmark 1826 

Central America 1826 

Norway-Sweden* 1828 

Great Britain* 1828 

Martinique and Guadaloupe. 1828 

Brazil 1828 

Prussia 1829 

Full Reciprocity. 

British North America and 

West India 1830 

Austro-Hungary 1831 

Spain 1832 

Mexico 1832 

Russia 1832 

Mecklenburg-Schwerin .... 1834 
Portugal, Madeira, Porto 

Santo and Azores 1836 

Tuscany 1836 

Venezuela 1836 

Greece 1838 

Sardinia 1839 

Holland 1839 

Hanover . . % 1840 

Portugal 1840 

Ecuador 1842 

Cayenne 1842 

Sicily 1845 

Belgium 1846 

Hanover* 1846 

Oldenburg* 1847 

♦Extension or renewal. 



Nation. Year. 

Full Reciprocity. 

Mecklenberg and Schwerin* 1847 

Mexico 1848 

New Grenada 1848 

Great Britain 1849 

Guatemala and Costa Rica . . 1852 

Salvador 1852 

Peru 1852 

Holland* 1853 

Argentina 1854 

Sicily 1856 

Papal States iSs8 

Denmark* 1858 

Belgium 1859 

Paraguay i860 

Venezuela 1861 

Ottoman Porte 1862 

Bolivia 1862 

Honduras 1865 

Haiti 1866 

Dominican Rep 1867 

Nicaragua 1868 

Madagascar 1868 

Italy 1871 

Japan 1872 

France* 1873 

Salvador* 1874 

Peru* 1874 

Belgium* 1875 

Korea 1882 

Madagascar* 1883 

Spanish Islands 1886 

Spain* 1887 

Peru* 1888 

Tobago 1891 

Philippine Islands 1898 

Japan 1898 



10 From Tariff Laws, and Congressional Record, Feb. 13, 1907. 

(505) 



66 The Annals of the American Academy 

The original intent of shipping reciprocity was to benefit Amer- 
ican shipping, but its ultimate effect in this respect was detrimental. 
It was the American marine and not those of foreign nations which 
declined in the subsequent free competition. Though there may 
have been considerable decline even if shipping protection had been 
retained, the force of competition was greatly increased by the 
introduction of shipping reciprocity. 

Reciprocity Treaties and Agreements. — During the later period 
of tariff legislation the most important provisions enacted with the 
intent of promoting foreign commerce were those providing for 
commercial reciprocity. An examination of Table III will indicate 
that the first treaty of this character was negotiated with Canada 
and took effect in 1855. It provided for commercial reciprocity on 
a large number of agricultural and forest products. 

This treaty favored Canada more than the United States. It 
was negotiated at the time when protectionism was almost extinct, 
and was intended as the first step toward free trade. 11 With the 
exception of rice, cotton, tar pitch, turpentine and tobacco, prac- 
tically all the articles included in the treaty were those of which 
Canada had a surplus. The manufacturing products which the 
American exporter desired to market in the provinces were not 
included in the treaty provisions, and in order to replenish the 
revenue lost because of the free trade in agricultural products, 
Canada at once increased the tariff on those of the manufacturing 
industries. During the years from 1855 to x 859 the rates on 
molasses were increased from 16 to 30 per cent, on boots and shoes 
from 12.5 to 25 per cent, and on cotton, woolen, silk and iron goods 
from 12.5 to 20 per cent. 12 Imports from Canada increased rapidly. 
but the effect upon the market for the products of the United States 
was unfavorable. 

When, in 1866, the renewal of the treaty was under considera- 
tion, hostile sentiment had become so strong that it failed. The main 
reasons for this hostility were: (1) Public sentiment had returned to 
protection, (2) there was a strong sentiment against Canada and 
Great Britain because of their attitude during the Civil War, (3) the 
Southern Party in England was attempting to weaken the relations 
of the United States with Canada, (4) special interests were 

"Stan wood, American Tariff Controversies, Vol. II, p. 136. 
u Laughlia and Willis, Reciprocity, p. 40. 

(506) 



Provisions for Promotion of Foreign Trade 



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(507) 



68 The Annals of the American Academy 

"pressed by Canadian competition, forcing them to reduce prices 
to the consumer where otherwise they would have found it easy to 
maintain them," 13 and (5) the United States had drawn the short 
end in the commercial arrangement. 

The treaty was not commercially satisfactory, but the political 
influences mentioned played an important role at the time of its dis- 
continuance. Charles F. Adams went so far as to say that "all these 
measures (for discontinuance) were the result rather of a strong 
political feeling than of any commercial consideration.'' 14 

The Hawaiian Reciprocity Treaty which became effective in 
1876, and which was renewed with but slight changes in 1887, 
continued until the annexation of the islands, and, in striking con- 
trast with the Canadian experiment, was both politically and com- 
mercially successful. It placed practically all the products of the 
Hawaiian Islands upon the free list, and practically all American 
exports to the islands, especially those of the manufacturing indus- 
tries,- were likewise admitted free of duty. Immediately after the 
treaty became effective, the export trade with Hawaii increased 
from $662,164 in 1876 to $1,272,949 in 1877, and the import trade 
from $1,376,681 to $2,550,335. Throughout the twenty-two years 
of the treaty's life both the import and export trade increased with 
but few interruptions. 

But the chief aim of the treaty was political. The opinion 
was commonly expressed at the time of its negotiation that unless 
the United States secured control of the islands they would fall 
into the hands of Great Britain. They were desirable as a stepping 
stone to the markets of the Orient, and it was hoped that the treaty 
would finally result in annexation. The clause which prevented 
Hawaii from extending similar privileges to other nations, and the 
free entrance of all her chief products were highly instrumental in 
confining Hawaiian commerce almost exclusively to the United 
States, and in causing an extensive investment of American capital 
in Hawaiian sugar plantations and general industries. 15 When this 
w r as accomplished, the political annexation was but the climax to 
the successful termination of the reciprocity treaty. 

These, however, were but isolated treaties, a\id no general pro- 
visions for reciprocity were enacted until 1890. The movement was 

13 Laughlin and Willis, Reciprocity, p. 64. 

"House Ex. Doc. Thirty-ninth Cone., 1st Sess., Vol. I, Part I, p. 111. 

u Laughlin and Willis, pp. 83-84. 

(508) 



Provisions for Promotion of Foreign Trade 69 

supported by Secretary Blaine, who, even at this time, when the 
manufacturing surplus was relatively small, said: "I wish to de- 
clare the opinion that the United States has reached a point where 
one of its highest duties is to enlarge the area of its foreign -trade. 
. . . I mean the expansion of trade with countries where we can 
find profitable exchanges." These countries he believed were 
Mexico and the republics of Central and South America. His aim 
was to inaugurate free trade in the Western Hemisphere on a large 
number of articles. 

Though the reciprocity desired by Secretary Blaine was de- 
feated by the special interests representing wool, copper, wood and 
ores, 10 the sentiment favoring an extension of the foreign markets 
succeeded in enacting a provision for limited retaliation. Section 
3 of the McKinley Act provided that if the President believed that 
any nation, exporting sugar, molasses, coffee, hides or "any such 
articles," imposed duties upon American products which he consid- 
ered reciprocally unequal, he might remove these imports from the 
free list and impose upon them the duties specified by law. As is 
shown in Table III, under this section of the McKinley Act, agree- 
ments were formed with Germany, Austro-Hungary and various 
countries of the West Indies and Central and South America. 

The effect of these agreements was, however, but slight, be- 
cause all were virtually abrogated by the Wilson Act of 1894. Ger- 
many removed the restrictions against American meats and levied 
the conventional German tariff on most of the agricultural imports ; 
and Austro-Hungary extended "most favored nation" treatment to 
American products. The trade with both of these nations was 
favorably affected, 17 but of all the agreements with the West India 
Islands and Central and South America, the Cuban agreement alone 
resulted in an increased trade. The remainder of these markets 
were as yet so undeveloped and were so lacking in the essential 
commercial machinery that it would be unreasonable to expect a 
spontaneous response to tariff arrangements which lived but two or 
three years. The McKinley agreements contained the basis for an 
expansion of foreign commerce, but their existence was terminated 
by the approaching wave of free trade agitation. 

When, four years after the enactment of the Wilson Act, the 

16 Stanwood, II, p. 280, Speech of Sen. Gibson, of Louisiana. 
17 U. S. Commerce and Nav. Repts. 1892-1894. 

(509) 



jo The Annals of the American Academy 

Republican party was overwhelmingly re-elected, protectionist senti- 
ment had reached its climax. Though there was again a demand for 
increased foreign markets, protectionism was so strong that the 
reciprocity provisions of the Dingley Act were distinctly weaker than 
those of seven years prior. The first part of section 3, which was 
intended for France and Germany, provides that the President may 
negotiate reciprocity agreements by reducing the tariffs upon argols, 
crude tartar, wine lees, brandies, spirits, champagne and sparkling 
wines, still wines, vermuth, paintings and statuary. The second 
part of this section contains an equally scanty list of articles — 
coffee, tea, tana beans, vanilla beans or "any such articles" — and 
was inserted to favor the Central and South American republics. 
Besides these provisions, the present tariff law contains a section, 
which upon paper appears far-reaching, but which in reality was 
inserted rather for policy than for expected results. Section 4 pro- 
vides -that the President may negotiate reciprocity treaties with any 
nation, — but he may not go below 20 per cent of the Dingley rates, 
and such treaties must be concluded within two years and must be 
ratified by Congress. 

Under section 4 of the Dingley Act, eleven treaties 18 were 
successfullly negotiated, but not one was ever ratified by the Senate. 
But under section 3, in spite of the meagerness of its provisions, 
agreements were made with Germany, France, Italy, Portugal and 
Switzerland. Germany again removed the restrictions from Amer- 
ican meats, and granted the full conventional tariff to the great bulk 
of imports from the United States. The agreement with France 
extended the French minimum tariff to a limited number of Amer- 
ican agricultural products. The Italian and Portuguese agreements 
were based upon a limited number of both agricultural and manu- 
factured products ; and the Swiss agreement, which was abolished 
was based upon the "most favored nation" clause of the commercial 
treaty of 1850. The export trade 19 with Germany has increased 
from $184,648,094 in 1900 to $191,271,367 in 1905, and that it is 
partly due to the agreement which will end on June 30, 1907, unless 
further extended, is unquestionable. But, on the other hand, the 
agreement with France is handicapped by the meagerness of its own 

u These treaties, known as Hie Kasson Treaties, were with Jamaica, Turks 
and Caicos Islands, Barbados, Bermuda, British Guiana, Dutch West Indies, 
Dominican Republic, Nicaragua, Ecuador, Argentina and France. 

19 U. S. Commerce and Navigation Reports, lf)00 and 1905. 

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Provisions for Promotion of Foreign Trade Ji 

provisions, and in recent years American exports to Italy and Portu- 
gal have sharply declined. 

The last reciprocal tariff arrangement entered into by the 
United States is the Cuban treaty of 1903. Cuba, by her position, 
is commercially bound to the United States ; yet, largely because 
of Spanish possession aided by prohibitive Spanish tariffs, the 
natural tendencies of trade were for decades so diverted that, though 
Cuban merchants found their chief market in America, they bought 
but few American products. Even as late as 1904 the United 
States marketed 83.6 per cent 20 of Cuba's exports, but furnished 
only 42.7 per cent of her imports. Political enthusiasm was doubt- 
less an important factor in the negotiations, but there was also a 
permanent desire, especially from the standpoint of exports, to 
stimulate the American trade with Cuba. 

To accomplish this it was soon found that the Dingley Act was 
inadequate, and the negotiations resulted, not in an Executive agree- 
ment limited to a scanty list of commodities, but in a very complete 
and closely woven treaty. The United States agreed to admit all 
dutiable products of Cuba at a reduction of 20 per cent of the gen- 
eral tariff rates. Cuba agreed to admit a long list of enumerated 
American products at reductions of 25, 30 and 40 per cent, and all 
other dutiable goods at a reduction of 20 per cent. Both the United 
States and Cuba, moreover, mutually agreed that the concessions 
granted in the treaty should be distinctly preferential and should be 
extended to no other nation. 

The growth of trade with Cuba in recent years has been almost 
spectacular, 21 and was effectively stimulated by the treaty. In 1900 
the imports from Cuba were valued at $31,371,704, and in 1905 at 
$86,304,259. Similarly, in 1900, the exports of American products 
to Cuba were valued at $25,236,808, and in 1905 at $36,407,932. 
While the Cuban treaty clearly indicates what can be accomplished 
by framing tariff provisions with the intention of promoting foreign 
trade, it is an isolated and exceptional instance, as the trade with 
Cuba comprises but 4.7 per cent of the total foreign commerce of 
the United States. 22 

Miscellaneous Provisions. — As is shown in Table I, numerous 
miscellaneous tariff provisions, designed to promote foreign com- 

^U. S. Commerce and Navigation Report (1905), pp. 34-35. 
* l Ibid., 1900-1905. 
vibid., 1905, p. 44. 

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•j2 The Annals of the American Academy 

merce have been enacted from time to time. From the very begin- 
ning, re-export drawbacks were granted. At first they were limited 
both as to the number of articles and as to time, but in 1861 a gen- 
eral re-export drawback of 90 per cent was established. In 1890, 
under the McKinley Act, it was provided that if raw products were 
imported, and then manufactured and re-exported, 99 per cent of the 
original duty paid shall be refunded ; and this provision was renewed 
in all subsequent tariff laws. Likewise, from time to time, regula- 
tions were made for the bonding of goods in transit. In 1864 treaty 
arrangements were made with Japan whereby certain articles were 
placed upon the Japanese free list and others were given a tariff of 
five per cent. Three years later the commercial treaty with Mada-* 
gascar extended the "most favored nation treatment" to American 
products. In 1871 a treaty with Great Britain removed discrimi- 
nating tonnage charges on the Great Lakes and various Canadian 
canals and rivers, and in 1892, in order to enforce this treaty, 
retaliatory tolls were levied upon vessels going through the St. 
Mary's Falls Canal to Canada. Both the Wilson and Dingley Acts 
permit articles for the building of vessels designed for the foreign 
trade to enter free of duty; but this has never had an appreciable 
effect because it is at the same time provided that such vessels can 
engage in the coastwise trade but two months annually. Both of 
these laws, further, permit articles needed for the repair of vessels 
engaged in the foreign trade to enter free of duty. Finally the Ding- 
ley Act provides that the petroleum, binding twine and sulphuric 
acid of no nation which discriminates against the American product 
shall be upon the free list; yet this again has but a meager effect, 
because the United States imports but an insignificant quantity 
of such commodities. Other provisions, enumerated in Table I, 
were at various times enacted, but all are distinctly a secondary 
factor in the general tariff schedules. 

Conclusion. — From an analysis of the tariff schedules it be- 
comes evident that, throughout the entire tariff history, provisions 
have been inserted for the purpose of promoting foreign commerce. 
During the first period of tariff legislation the chief provisions of this 
character were those designed to promote the Oriental trade and to 
protect American shipping. During the later period the reciprocity 
treaties and agreements were of primary importance as regards 
foreign commerce. It is, moreover, evident that, when considered 

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Provisions for Promotion of Foreign Trade 73 

by themselves, provisions of this character were both numerous and 
not without appreciable effect. 

When, however, these provisions are regarded as part of the 
aggregate tariff system, both their number and effect are strikingly 
unimportant. The predominating factor has been protection, and 
from the commercial standpoint this has always been framed to 
promote the domestic rather than the foreign market. As early as 
1 79 1, Alexander Hamilton argued that a foreign market is both 
small and unstable, and that a "domestic market is greatly to be 
preferred." 23 When, after the War of 1812, the infant industries 
were threatened by a flood of foreign imports and the farmers were 
complaining of an unstable market for their products, the home 
market argument was actively propounded. It reached its first 
climax in 1820, when $ie demand for a domestic market drew the 
western and middle agricultural interests in favor of protection. 24 
The intent of tariff legislation as regards foreign commerce during 
the entire period before the reaction of 1846 is expressed in the 
words of Henry Clay: "It is most desirable that there should be 
both a home and a foreign market. But with respect to their rela- 
tive superiority I cannot entertain a doubt. The home market is 
first in order and paramount in importance." 

From 1846 to 1861 there was a free trade reaction, but as soon 
as the protectionist forces successfully rallied the old preference for 
the domestic market again appeared with its accustomed vigor. 
Even during the first administration of President Cleveland the 
home market argument was successfully appealed to. The McKinley 
Act, likewise, though it contained the most important reciprocity 
provisions ever enacted by Congress, was manifestly protective. 
Professor Rabenno writes: "The predominating characteristics of 
the famous McKinley 'Bills' is a spirit of absolute aversion to for- 
eign imports and to international trade." 25 Finally the present tariff 
law was enacted when protectionism was at its height; its reci- 
procity provisions are decidedly weaker than those of 1890, and its 
opposition to foreign imports is decidedly greater. 

In one respect protection has indirectly resulted in an increase 
of exports, as for twenty-five years an increasing proportion of 

^Report on Manufacturers (1791), p. 33. 

M State Papers, Finance Volume for 1820; Annals of Congress, 1st Sesa., 1820, 
Appendix, etc. 

^American Commercial Policy p, 206. 

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74 The Annals of the American Academy 

America's exports have consisted of manufactured products. In 
1880 this proportion was 12.5, but by 1905 it had increased to 36.45 
per cent.- Whatever influence, therefore, protectionism has had 
upon the growth of this manufacturing surplus, has indirectly re- 
sulted in a greater export trade. The influence, however, has been 
in the creation of the products and not in providing them with a 
foreign market. 

Though numerous provisions were inserted into the tariff 
schedules for the purpose of promoting foreign commerce, in the 
aggregate the American tariff policy was not designed to facilitate 
commercial relations with foreign countries. In view of the wide- 
spread adoption of dual tariff systems by foreign nations, it is evi- 
dent that in no important nation, which recognizes protection, do 
the tariff schedules give so little cognizance to foreign trade as in 
the United States. 

"•U. S. Commerce and Navigation Report, 1905. 



AMERICAN MANUFACTURES AND FOREIGN MARKETS 



By Eugene N. Foss, 
Treasurer of the B. F. Sturtevant Company, Boston, Mass. 



I cannot bring myself to feel that the foreign trade of the 
United States is anything like what it could be or should be. While 
I recognize that other obstacles than tariff schedules, at home and 
abroad, have stood in the way of the development of our commerce, 
it is with the tariff that I am chiefly concerned in this article. In 
my opinion, the abuse of the protective system by well-informed 
lawmakers, safe in the indifference of a well-meaning but un- 
informed public, has been responsible for a very dangerous per- 
version of national purpose, if not of national character. 

The word "protection" is a great word. The people have 
accepted it at its face value. They have cheerfully and unthinkingly, 
I maintain, supported the high protective policy for more than a 
generation, in the belief that it stood for a proper equalization of 
labor conditions here and abroad ; if for anything more, a slight 
but not unreasonable advantage in the home market. This last, 
moreover, has been rather an offshoot or incidental result of the 
system than a primary purpose with the voters, all the more dan- 
gerous to the general interest because of the subtle nature of its 
growth. 

It is a popular delusion that goods of foreign manufacture are 
invariably produced cheaper than the same lines could be made in 
this country. The American people have been for so long educated 
to this fallacy that when tariff reductions are proposed, the popular 
mind at once jumps to the conclusion that these reductions would 
be followed by a "flood of foreign goods," which would break prices 
in this country, bring on a general business depression and curtail 
wages. Such a belief — generally speaking — is based upon no 
knowledge of actual industrial conditions ; and it is needless to say 
that it is systematically encouraged by the politicians, to whom 
change may mean personal disaster. 

Another mistaken notion, peculiar to the United States, relates 
to the value of an import trade. Your high protectionist regards 

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j6 The Annals of the American Academy 

imports as a dead loss, a drain upon the resources of the country, a 
peril to be checked. He can see no profit in them, and affects to 
believe that every dollar's worth of imports into the United States 
displaces a dollar's worth of American goods. Others, perhaps as 
well informed as this exclusionist, think differently. One of the 
prime functions of an imported article is to make two American 
dollars grow where one grew before, particularly if the article be a 
raw or partly finished product or a machine. The heavy burden 
laid on the woolen industry by the excessive duties on raw wool is" 
a case in point. 

Equally delusive is the prevailing American idea that the for- 
eigner is temperamentally so constructed that he prefers a low to a 
high selling price. To hear the arguments of some high protec- 
tionists, one would be led to believe that nowhere but in the United 
States is there a desire for profits in a business transaction. A 
mast striking example of the incorrectness of this theory has been 
developed in the course of agitation for reciprocity with Canada. 
The United States has an enormous exportable surplus of wheat, 
the raisers of which, therefore, can by no possibility be benefited by 
a protective tariff. There is, however, the usual needless duty on 
wheat of twenty-five cents a bushel ; and when it was proposed in 
the United States to abolish this duty, to the evident advantage of 
our mills, railroads, ports and commission merchants, the customary 
shriek went up from the high protectionist camp that such action 
"would ruin the American farmer." Our Canadian friends would 
have been pleased, of course, to have the duty removed : but not, it 
appeared, for the reason assigned by the high protectionists. On 
the contrary, the Canadian argument for free trade in wheat, voiced 
by men of the stamp of John Charlton, was that the Canadian grow- 
ers wanted the benefit of the competition of American buyers in 
Canadian markets. In other words, the guileless Canadians, in advo- 
cating free wheat, were looking for a chance to raise and not to 
depress their prices. 

This incident is full of significance to the business man. In my 
experience with the Canadian reciprocity movement I have found 
that where the Canadians favored reciprocity at all, it was because 
it would give them the opportunity of raising their prices to the 
American level. One of the most palpable of the ill effects of an 
exclusive tariff is that it has a tendency to lower the standard of 

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American Manufactures and Foreign Markets J J 

quality, wages and prices abroad, and thus create the very bugbear 
with which the advocates of freer trade have to contend. A chief 
advantage of reciprocity with Canada would be found not primarily 
in reducing prices, although that would follow in some needed cases, 
but in checking the tide of hostile tariff legislation which has now 
set in against us. 

These and other popular misconceptions have been very 
shrewdly utilized by the dictators of our fiscal legislation. Until 
the period of our Civil War we had got along prosperously under a 
moderate tariff, but, beginning in 1861, under the pressing need of 
revenue, a series of "war tariffs" was enacted, which reached their 
climax in 1864, with average duties of 47.6 per cent. It was not 
pretended that the high duties levied by these tariffs were for other 
than revenue purposes or were to be more than temporary, while 
many of the duties on imports of manufactures were assessed as an 
offset to the internal taxes made necessary by the demands of war. 
To make a long story short, most of the duties levied under these 
extraordinary circumstances have been continued to the present 
time, and many of them have been increased. (The average rate of 
duty on dutiable imports for 1906, under the Dingley Act, was 
44.16 per cent.) Not only this, but year after year articles, particu- 
larly raw materials, have been transferred from the free to the 
dutiable list, until to-day there is a tariff tax upon practically every 
article of commerce, of whatever nature, produced in this country. 
These "political duties," as they may properly be termed, have been 
voted into the list regardless of any consideration of legitimate pro- 
tection and in pursuance of a systematic scheme of blanketing all 
the products of the United States with "protection," that the num- 
ber of opponents of protection might be kept as small as possible. I 
repeat, that the interests of legitimate protection have been com- 
pletely ignored in the framing of our customs tariffs since the Civil 
War. For illustration, witness the coal, iron ore, pig iron, lumber, 
wheat, hide, copper, lead and borax duties. Of most of these 
articles the United States is the largest producer in the world, and 
we have had an abundance of all. Add cotton, corn and petroleum 
• — the last named dutiable under certain circumstances — and climate, 
and you have a list of natural resources with which any civilized 
country could defy the world. I am not writing from the free trade 
point of view. I am merely trying to indicate that, from the point 

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yS The Annals of the American Academy 

of view of the protectionist, our fiscal system lays burdens upon our 
people which the necessities of honest protection do not warrant. 

The United States is the only nation in the world that sys- 
tematically imposes tariff taxes on raw materials. A raw material 
is equally valuable to a manufacturing industry,' whether it be of 
domestic or foreign origin, and its price must necessarily be regu- 
lated by its quality and the demand for it. If a tariff restricts its 
use, as in the case of wool, industry, i. e. labor, cannot be the 
gainer. Not only has the number of sheep raised in the country 
decreased since the enactment of the McKinley bill, but the con- 
sumption of wool has decreased also — from 8.75 pounds per capita 
in 1890 to 5.97 pounds in 1900, and to a little more than 6 at present. 
In the same period, and up to the present time, the use of cotton and 
shoddy in the woolen industry has increased enormously. The wool 
duty, therefore, has failed to stimulate the raising of sheep, except 
in the sparsely settled Northern Rocky Mountain states, while it has 
debauched the quality of woolen goods not only in the United 
States but all over the world, thus causing grave injustice to the 
consumer; and it has utterly incapacitated our manufacturers to 
compete in the markets of the world. Most other leading indus- 
tries are confident of their practical control of the home market 
under any circumstances, and are looking forward to the world's 
markets for their future development, if not prosperity. The woolen 
manufacturer, however, must keep on adulterating his goods and 
clinging to his rich home market so long as the foolish policy of 
taxing raw materials continues. 

Whether because of the inability of our manufacturers to com- 
pete abroad or of the superior attractiveness of the home market, 
it is a fact that the exports of manufactures by the United States 
($686,000,000) make a very poor showing in comparison with the 
production of the country, constituting only about 4 per cent in 
1906. The United States is the greatest manufacturing nation in 
the world, yet when more than 60 per cent of our exports are seen 
to be non-manufactures, while many articles outside this group 
represent only the roughest kind of manufacture, it is plain that 
we are not making the most of our opportunities. 

Iron and steel, based upon raw materials (iron and coal) of 
which we are the largest producers in the world, led our exports 
in 1906, representing 23 per cent of our total exports of manufac- 

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American Manufactures and Foreign Markets 



79 



tures and 14 per cent of our production of iron and steel. This 
was chiefly machinery, and demonstrates how eagerly our com- 
petitors are equipping themselves for competition with us in the 
markets of the world, both in manufacturing and agriculture. Some 
40 per cent of our iron and steel manufactures were taken by Canada 
and Mexico alone. Copper formed the second largest item of our 
exported manufactures, although practically in the form of raw 
material. We exported 56 per cent of our entire production of 
mineral oils, 11 per cent of our cotton manufactures, the raw ma- 
terial of which was on the free list, and only one-half of one per 
cent of our woolen goods, weighted down as they were with duties 
approximating 50 per cent on raw wool. 

We produce three-fourths of the world's cotton and send 63 
per cent of it abroad. We sell abroad only one-tenth as much cotton 
goods as Great Britain, while her exports of cotton manufactures 
alone exceed by a billion yards the total production of the mills of 
the United States for the domestic and export trade combined. The 
products of German cotton mills to-day are sold eighteen months 
ahead, while Italy, raising not more than 10,000 bales of cotton and 
importing 500,000 bales from us has developed in twenty years a 
cotton manufacture which gives employment to 300,000 persons, 
or more than the total population of Fall River, New Bedford and 
Lowell combined. Italy exported more than $15,000,000 worth of 
cotton goods in 1906, yet she is paying thirteen dollars a ton for 
her coal. This is not intended to be an exhaustive presentation, but 
it is sufficient to show that the chief service rendered by our export 
trade, so far, is to feed the remainder of the world and to equip it 
with the tools with which to supply the individual wants of all 
mankind outside the United States. 

To turn for a moment to the import side of the situation, of 
our total imports of $1,226,000,000 in 1906, no less than $635,000,- 
000, or 52 per cent, exclusive of foodstuffs like sugar, fruits and 
wines, were of raw or partly manufactured materials for further 
use in manufacturing, an increase of more than $300,000,000 in 
fifteen years. Of these, some $237,000,000, or about 35 per cent, 
were dutiable at rates ranging from 10 per cent to more than 50 
per cent ad valorem. The full extent of the handicap to industry 
by these burdens laid upon their basic raw material is only out- 
lined in the statistics of import, for in many instances importation 

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80 The Annals of the American Academy 

is prohibited by these tariff taxes, while in others the price for the 
domestic article is needlessly increased by the tariff. 

That the situation is of distinct disadvantage to all labor and 
capital employed in manufacturing is clear, while the attempt of 
manufacturers to uphold themselves by their boot straps, as it were, 
by means of high compensatory duties, is uneconomic, to say noth- 
ing of the moral question involved with relation to the consumer. 
The duties on raw materials are justified by some distin- 
guished high protectionists on the ground that the producer of raw 
materials is entitled to protection equally with the manufacturer. 
His rights certainly are equal to those of any other producer, but 
he does not get true protection by making it difficult to conduct 
profitably the mill or factory which is buying his goods. Prices 
are and always must be determined by the laws of supply and 
demand. When artificial they are unstable and likely to fall dis- 
astrously at any time. When the price of a raw material is artifi- 
cially raised above the actual value of that commodity as an element 
of manufacture, the producer is getting something to which he is 
not entitled by any law of justice or reason, whatever the law as 
written in the tariff schedules may be. 

Artificial prices are bound to curtail production and encourage 
substitutes and adulteration. Business to-day, prosperous as it is, 
is only a fraction of what it might be but for the artificial prices of 
coal, iron, lumber, hides and wool. In my own vicinity, for ex- 
ample, hundreds of acres of choice land are lying vacant upon which 
capital would be glad to build if a reign of inflated prices did not 
restrict construction to the most pressing necessities. The most 
serious consequence of this condition is that the people are com- 
pelled to live in inferior houses — "three-deckers" and flats instead 
of single homes of their own. 

Considerations like the foregoing, it seems to me, indicate 
clearly why the United States has not yet come into its own as a 
manufacturing nation. I cannot agree that the home market is 
indefinitely to be preferred to the world market ; but whether or not, 
the world market must prove the ultimate salvation of American 
manufacturers, and now is the time to prepare for sharing it. The 
iron and steel trade has demonstrated with what success the foreign 
field may be entered. Our boots and shoes are now sold abroad in 
quantities equal to England's. The experiment with Southern 

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American Manufactures and Foreign Markets 81 

cotton goods has demonstrated that in some lines of cotton manu- 
facture, at least, notwithstanding all handicaps American cottons 
may supply a profitable share of the enormous demand for cottons 
in the Orient and elsewhere. In no other country unless India, 
would Great Britain have a more promising field for a permanent 
cotton trade than China, yet many of our Southern cotton mills are 
manufacturing exclusively for the Chinese market. Of $36,000,000 
worth of uncolored cottons sold abroad in 1906, nearly $30,000,000 
went to China. In the past four years our exports of cotton goods 
have increased faster than in the ten years previous. To China we 
sent in 1892, $3,881,000 worth of manufactured cottons. In 1906, 
$29,377,000 worth. 

Cotton manufacture is only in its infancy in this country. Nor 
need it depend on child labor, cruel hours and high tariffs to hold 
the domestic or compete successfully in any foreign market. The 
long period of high tariffs on everything entering into the construc- 
tion and operation of a mill, with the heavy duties on imports and 
higher cost to the American consumer than would be tolerated 
anywhere else in the world, must give way to an era in which 
artificial handicaps to production must be removed. The path to 
economical manufacturing must be cleared, and then American 
made textiles will stand with American iron and steel in the markets 
of the w r orld, and the labor which produces them will be equally 
well paid. 

Surveying the field broadly, our present prosperity is feverish 
and apprehensive, ever trying to discount in advance the hour 
when some disaster or failure of crops may bring a sudden reces- 
sion of business from which we cannot quickly recover. The 
greatest safeguard against such an emergency is a stable foreign 
trade, acquired by slow and patient methods perhaps, but with a 
world-wide basis and a corresponding solidity. One by one the 
great industries of the country are seeking foreign outlets, and they 
that succeed will best stand the strain when the inevitable period of 
business depression comes. Said Mr. Gladstone, in 1881, speaking 
to Englishmen of the commercial supremacy of Great Britain: 
"Nothing in the world can wrest it from you while America con- 
tinues to fetter her own strong hands and arms, and with these 
fettered arms is content to compete with you who are free in 
neutral markets." 



THE TARIFF AND THE PRICE OF AGRICULTURAL 

MACHINES 



By Charles Deering, 
International Harvester Co., Chicago. 



The tariff restrictions of the United States play an important 
part in the marketing of our surplus products. We have not grasped 
the old axiom, "Do unto others as you would have others do unto 
you." We build a tariff wall and ask European countries to take 
their walls down. Manifestly there is little justice in our demands. 
We have demonstrated to the world that protection of home indus- 
try is a good thing. If good for us, why not good for them? As 
a consequence, we find many European markets closing against our 
manufactured products. Germany, which, up to the present time, 
has only imposed a nominal tariff, proposes to put into effect a tariff 
which will be practically prohibitive. The result is readily apparent 
— either the American manufacturers must stand the increased cost 
of marketing our products, or make the consumer pay for it. If 
the burden falls upon our manufacturers, they will be handicapped 
by the increased cost of marketing the goods — they must do busi- 
ness without any profit or at a loss. If the consumer stands the 
increased cost, we shall not be able to compete with the local manu- 
facturers and foreign manufacturers who do not have a tariff wall 
raised against the admission of their products. This leaves us only 
this alternative — either quit the foreign field, or invest American 
capital in manufacturing plants on foreign soil. 

The new tariff restrictions which Germany proposes to estab- 
lish are but an indication of the general trend of foreign policy in 
this particular. Let us consider the effect of our present tariff system 
upon our export trade in agricultural implements. Under the present 
schedule the German tariff on binders is $11.23, reapers $5.12, 
mowers $3.26, rakes $3.76. When the new German tariffs go into 
effect, on July 1st, American goods will be handicapped to a still 
greater extent than at present. Germany will enforce against us 
the maximum rate of her tariff, due to our unwillingness to make 
any concessions from our present Dingley tariff. From that time 

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Tariff and Agricultural Machines 83 

on, unless some modification of the rule can be secured before the 
date mentioned, the rate per 100 kilos (220.46 pounds) on agri- 
cultural implements, such as hand plows, cultivators, grubbers, 
potato planters, harrows, hand and horse rakes; weighing three 
kilograms (6.6 pounds) or over will be $1.90; weighing less than 
6.6 pounds $2.86; the present tariff on these goods varies from 
seventy-one cents to two dollars and thirty-eight cents. On all 
heavy agricultural implements this new rate will be so high as to 
practically shut off all competition from the countries against which 
this duty is enforced. 

The new tariff therefore represents an increase from 71 cents 
to $1.90 per 100 kilos on the lighter machines and from $2.38 to 
$2.86 on the heavier grades. If such an increase does not destroy 
our German trade in agricultural implements, it will be sufficient at 
least to seriously cripple its development. To conserve this trado, 
now experiencing a marked increase, is to keep for American labor 
a market which will disappear in exact proportion as the sale of 
our goods abroad is interfered with. Our trade with Germany in 
agricultural implements is a growing one. In the eleven months 
ending November, 1906, we exported to that country $1,816,885 
worth of agricultural implements, as compared with $1,262,377 
worth for the corresponding period of 1905. A foreign market 
such as this, experiencing a marked growth, and with great possi- 
bilities of future development, is one that should not lightly be dis- 
regarded. The German market for agricultural implements is 
growing more rapidly at present than that in any other European 
country. It should not be allowed to languish because of any mis- 
taken tariff policy, but we should be willing to meet our European 
neighbors half way instead of trying to reap all the advantages 
while undergoing none of the sacrifices — which is our policy under 
our present tariff. If by following our present policy we exclude 
ourselves from the German market, we must expect to see the 
German adverse tariff offered as an inducement for capital to invest 
in that country for the manufacture of goods of a character similar 
to those now produced by us. Thus both the capital and the market 
for labor which we might have retained in the United States will go 
abroad. 

Canada imposes a ij l / 2 per cent ad valorem duty on mowing 
machines, harvesters and reapers, and a 20 per cent duty on cultiva- 

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84 The Annals of the American Academy 

tors, plows, harrows, hay rakes, drills, weeders and windmills. This 
is prohibitive and has resulted in a wonderful growth of the Cana- 
dian implement industry. American capital and American brains 
have gone across the border, and, with Canadian labor, have estab- 
lished implement plants. But for the tariff this capital would have 
stayed at home. 

The highest tariff which American agricultural implement 
manufacturers must meet is that of Austria-Hungary. The duty 
on a binder is $25.09, on a corn binder $24.91, shredder $109.48, 
reaper $14.34, mower $10.81, rake $5.24. It is almost needless to 
say that this duty makes the price of American agricultural ma- 
chines so high that it is only a question of time when more favored 
manufacturers will drive American products out of the market. 

Adopting a liberal policy in tariff arrangements with France 
also would have an important effect on our trade in agricultural 
implements with that country. France has both a minimum and 
maximum tariff schedule. The minimum schedule is in effect only 
with countries with which they have commercial treaties. The 
United States is the only great civilized nation which has no com- 
mercial treaty with France, and has thus not availed itself of the 
opportunity to secure for the benefit of its manufacturers the mini- 
mum tariff schedule. The fact that American manufacturers pay 
the maximum schedule on all importations into France has cost 
us millions of dollars annually which might have been saved had a 
commercial treaty provided for the minimum schedule. 

France, in spite of her friendly feeling, has reached the con- 
clusion that if we continue our present prohibitive tariffs and refuse 
to accept the offered treaty giving us the benefit of the minimum 
tariff, she cannot do otherwise than maintain a maximum tariff* 
against American products. Consequently, American manufacturers 
pay $20.27 duty on a binder, which is $9.20 more than Swedish, 
British, German, Russian or other manufacturers that import under 
the minimum schedule have to pay. The duty on a reaper is $12.16, 
on a rake $5.79 ; on a mower the duty is $9.26, which is $3.85 more 
than manufacturers importing under the minimum schedule are 
obliged to pay. 

During the eleven months ending November, tqo6. we exported 
to France almost $3,000,000 worth of agricultural implements. On 
all this the United States paid the maximum rate of fifteen francs 

(524) 



Tariff and Agricultural Machines 85 



per 100 kilos, as compared with nine francs per 100 kilos paid by 
other countries. This means that the implements exported to France 
from the United States had to be sold at such a price that they 
would be as cheap as the goods offered by competitors, even after 
adding the freight charges for from three to four thousand miles 
and in addition a duty of $1.20 on each weight of 200 pounds. This 
handicap, which the American manufacturer must accept or refuse 
to do business, places him at a great disadvantage. 

These are only four of the countries reached by firms doing an 
export business, but they serve to illustrate the effect of our present 
tariff relations and to accentuate the necessity for a reciprocal tariff 
to offer adequate protection to the American trade already estab- 
lished with foreign countries, and to induce the further growth of 
the export business. 

Our implement trade is growing even now, but it is growing 
only slowly, hampered as it is by adverse tariff legislation in the 
countries which should be our best customers. America's resources 
of coal and steel, combined with her mechanical ability and skilled 
labor, should enable her to compete on advantageous terms in the 
implement trade in every country of the world — and that they would ; 
if the means for extending foreign trade by a conciliatory policy 
that lies ready to our hands were used. 

The United States has at last gotten into the swing of world 
affairs in a political way, but it has not yet adopted a world-wide 
trade policy. Our present regulations of commerce were well 
enough in a world where rigid protective tariffs were the rule, but 
when other nations have adopted the policy of mutual concessions, 
it is foolish for us to think that they will grant us the same advan- 
tages gratuitously or that they will not retaliate against us if we 
continue to maintain our present uncompromising attitude. 

The energies of all people are now being devoted to creating 
trade, or material to be used in trade. The policies of almost all 
important governments are being shaped to develop trade at home 
and command the greatest possible share of it abroad. Armies and 
navies are created to secure trade indirectly, and trade has recently 
been one of the causes of the greatest military conflict the world has 
ever seen. The older countries have already arrived at a point 
where foreign trade is to them a national necessity if continued 
development is to take place. They are straining every nerve to 

(525) 



86 The Annals of the American Academy 

increase its amount. The United States is fast arriving at that 
condition, and a statesmanlike policy should dictate that we should 
look to the future and prepare to meet its problems. The develop- 
ment of foreign markets, disregarded or given but slight attention 
in the past, must be for us an increasingly important problem. 

One of the influences of first importance in this new develop- 
ment is machinery ; machinery to create economic goods in the first 
instance and machinery to market them once they are created. The 
world is in the midst of an era of extension of cultivation into 
regions formerly considered too cold, too dry, too damp or too hot. 
Even in the older countries hand cultivation is being replaced by 
machinery. Along with this exploitation the machinery of trans- 
portation must be developed, good roads, good railroads, harbor 
facilities and ships must be built. All this creates a demand for 
mechanical appliances greater than the world has ever known 
before. In supplying this demand the United States, from her 
natural advantages, should play the leading part. 

Another reason why the extension of foreign markets should 
deserve our attention is the effect of such a development upon our 
national prosperity. One of the consequences of this new exploita- 
tion of the world's resources is the increased interdependence of 
nations. No nation can now get along so well with its own products 
alone as it could a decade ago. The parts of the world are much 
more closely bound together, and the solidarity of interests grad- 
ually developing demands that the old spirit of exclusiveness and 
isolation be cast aside and reasonable adjustments of interests be 
made. 

This is the more important since we know from experience 
that when a country depends upon itself alone for its market and 
its source of supply that the periods of depression following periods 
of prosperity produce great national distress. At the present time 
the thought is gaining currency that we may run along prosperously 
for a while, but that sooner or later we shall again experience a 
period of "hard times." Possibly we may. It is often impossible 
to predict the turn social and economic forces may take. But in 
any case it seems evident that if we can free ourselves to some 
degree from the effects of purely local conditions the "hard times," 
when they come, will not be so severe. If we can, by developing 
;i reliable and elastic foreign market, reasonably assure ourselves 

(526) 



Tariff and Agricultural Machines 87 

that all our outlets for our products will not be going through 
periods of stringency at the same time, we shall thereby lessen the 
intensity of industrial depressions, even though we may not elimi- 
nate them entirely. This is another reason why we should turn 
our attention to the formulation of a comprehensive foreign trade 
policy which shall place us in agreement with the general practice 
of Europe. 



OUR TARIFF IN ITS RELATION TO THE GRAIN TRADE 



By Louis Muller, 
President Louis Miiller Company, Grain Receivers and Exporters, Baltimore. 



It is customary for writers upon our foreign trade to point 
out the fact that foodstuffs are the preponderating element, and it 
is often insisted that we have such an advantage in the production 
of these articles that they will compel their own market independent 
of what may be the tariff regulations in force. This is no doubt 
partially true; indeed, our own experience seems to prove it, but 
the argument is by no means conclusive that tariff regulations may 
not aid or hamper the foreign trade in these articles. In fact, quite 
the contrary is the case. 

'When we read that the internal commerce of the United States 
amounted in the year 1906 to $25,000,000,000 and that our foreign 
commerce reached almost $3,000,000,000, of which about $1,800,- 
000,000 were exports, it carries with it a feeling of satisfaction 
with our national prosperity. When it is added that under our 
present tariff system as much as $1,110,000,000 of these exports 
are represented by shipments of foodstuffs, as compared to about 
$475,000,000 worth of manufactures ready for consumption and 
$225,000,000 worth of partially manufactured products, it seems 
clear to the casual observer that foodstuffs will win their way abroad 
in any case, and that the chief efforts for promotion of foreign 
trade should be concentrated on manufactures alone. This mistake 
is an easy one. The fact that our economic position does allow us 
to force this amount of foodstuffs upon the foreign market, irre- 
spective of what adverse customs regulations may be enforced 
against us, by no means proves that a sane policy of conciliation by 
which these tariff bars might be removed or lowered would not 
enormously increase our export trade in these lines, much to the 
profit of that largest class of American "manufacturers" — the 
farmers — as well as to the advantage of all those whose business or 
labor is connected with the handling of their products. 

Until recently the peerless advantages of the American pro- 
ducer of agricultural products have been such that little attention 

(528) 



Tariff in its Relation to Grain Trade 89 

has been paid to developing a foreign market for them. The insist- 
ence of the home demand and the economic need of foreign countries 
provided in a rough way a ready market for all that was produced. 
This condition has largely ceased to exist; the change is due to 
two causes — first, our productive capacity has greatly outrun our 
home needs, and, secondly, the development of the use of the "maxi- 
mum and minimum" tariff in foreign countries, especially in the 
nations of continental Europe, has enabled them to exchange com- 
mercial favors with other countries less favored or less developed 
in the raising of agricultural products. This exchange has re- 
sulted in great benefit to the countries concerned and in increased 
difficulties for the maintenance of the trade of the United States, 
by placing her in a less favored position in comparison with the 
countries to which the reciprocity provisions have been extended. 

This condition of trade merits the most careful consideration 
of the people of the United States. The fact that our own and the 
European developments were bringing about conditions which would 
necessitate changes in our tariff policy has for almost a decade been 
patent to many leading American statesmen. They have seen that 
the problem of increased foreign markets must be faced and that 
our policy must be a broad one. President McKinley, in his last 
speech at Buffalo, delivered but a few hours before his assassina- 
tion, gave voice to this belief as follows : "What we produce 
beyond our domestic consumption must have a vent abroad. The 
excess must be relieved through a foreign outlet, and we should 
sell everywhere we can and buy wherever the buying will enlarge 
our sales and productions, and thereby make a greater demand 
for home labor ; the period of exclusiveness is past, the expansion 
of our trade and commerce is the pressing problem." 

This policy of mutual concession on custom regulations which 
President McKinley advocated in 1901 is all the more imperative 
in 1907, because of our greatly increased commercial activity and 
productiveness in both industry and agriculture. If we are to judge 
what the future will be from our past experience, still another 
reason may be urged why we should take care to develop a foreign 
trade. We can hardly expect a permanent continuance of our 
present surprising national prosperity. We should prepare to meet 
the possibility of periods of depression. With no important foreign 
outlets for our surplus products a period of trade stagnation is 

(529) 



90 The Annals of the American Academy 

rendered more acute by the flooding of the home market with goods 
for which there is but scant demand. Could we develop, however, 
close connections with other commercial countries, the market there 
offered, well acquainted with the virtues of American goods, would 
furnish an elastic outlet for goods which, on account of peculiar 
temporary local conditions, could not be marketed at home. With- 
out these intimate trade connections the American exporter who 
tries to increase his foreign shipments in times of domestic strin- 
gency finds himself hampered by the fact that his goods are 
unknown and therefore mistrusted by the foreign buyer. To avoid 
such a condition it is increasingly important that in times of pros- 
perity our foreign trade policy should be marked by a spirit of 
concession such as will encourage mutual dependence and the 
granting of commercial favors to the advantage of both parties. 

Any policy of reciprocity to be of real advantage to either party 
must be a comprehensive one, such as will insure to each party 
approximately equal advantages. Further, it must be compre- 
hensive in its application within the country itself, securing advan- 
tages equally for the various interests that will be affected by it 
Such are the policies which have been adopted by European coun- 
tries in extending their foreign trade, while the United States has 
consistently lagged behind with a tariff system inflexible, allowing 
no special advantages to be granted to one nation in return for 
equivalent advantages granted to us in some other line. Conse- 
quently many opportunities for extending foreign trade which have 
been open to European countries, and which they have been eager to 
grasp, have been neglected by us. It is true that in many of the 
European countries they have been forced to take the action they 
have taken by local conditions. They have been compelled to look 
to commerce beyond their own boundaries for much that we have 
been able to secure at home. Nevertheless, it is true that we are 
now in a position, and will be increasingly so in the future, when 
we too shall require an outlet for our products, and it would be 
foolhardy to continue in our inaction when our rivals are pushing 
forward to grasp the markets in which we shall ultimately have to 
compete with them. Trade in the beginning follows the line of least 
resistance, but once established is hard to divert from its customary 
course. To delay now, when we have the opportunity to win our 
share of foreign commerce by granting simply a quid pro quo, may 

(530) 



Tariff in its Relation to Grain Trade 91 

entail great loss in the future, when trade customs have become well 
established and our rivals control the situation through long famil- 
iarity with the peculiar interests to be served. 

Possessed of a "maximum and minimum" tariff, a European 
country has a powerful means of oppression against American 
trade which it may use at its will. Severe strictures may be placed 
upon our commerce, and, lacking reciprocity arrangements, we have 
nothing to offer in return for their removal. The only course open 
to us is to submit to the adverse laws or to engage in retaliatory 
legislation. Both these solutions are no solutions. To refer again 
to President McKinley's last address. He says : 

"Commercial wars are unprofitable. A policy of good will and 
friendly trade relations will prevent reprisals. Reciprocity treaties 
are in harmony with the spirit of the times, measures of retaliation 
are not. If perchance some of our tariffs are no longer needed for 
revenue nor to protect our interests at home, why should they not 
be employed to extend and promote our markets abroad?" In 
spite of this fact, however, the United States continues to be 
the only one of the important commercial countries which rigidly 
maintains its one standard tariff regulations, thus regularly exposing 
itself to the danger of retaliatory legislation and preventing the 
reaping of the mutual advantages possible of attainment by the 
adoption of reciprocity treaties. 

Let us illustrate the effect of such a system in a single instance. 
In the fall of 1905, the demand for American foodstuffs in Germany 
suddenly increased, exceeding anything previously recorded, as is 
shown by the accompanying table. (See page 92.) 

This table shows not only a remarkable contrast between the 
imports of American grain in 1904 and 1905, but it will be noticed 
that the increase is especially great in December. This increase is 
typical of the movement during the autumn in general. The ship- 
ments of corn in this month in 1905 were more than three times 
those of the same month for 1904, and almost equal to one-half of 
the entire shipment for 1904. In 1904 no shipments were recorded 
of oats or wheat in December, but in 1905 the amounts reached 
1,638,139 and 600,304 bushels, respectively. Even in the shipment 
of wheat flour, which for the year as a whole showed a loss, there 
was a remarkable increase for the autumn months. 

There seemed to be every reason to look for a continuance of 

' (531) 



92 



The Annals of the American Academy 






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(532) 



Tariff in its Relation to Grain Trade 



93 



this promising trade, but the agrarian interests at once became 
alarmed and got a law passed through the Reichstag raising the 
duty on foreign grains (wheat, maize, oats and rye), to take effect 
on the ist of March, 1906. The increase, as everyone knows, was 
enormous. The rates, of course, would apparently affect all foreign 
grains, and the United States would suffer only as all other grain 
exporting countries would, and would therefore have no cause to 
complain. But here became evident the disadvantage of the 
United States due to the fact that it had no reciprocity treaty. 
Germany's tariff system is planned on the dual basis — a maximum 
and minimum tariff — and the maximum rates were threatened on 
American grain if the negotiations for a reciprocal tariff treaty 
should fail. The difference between the maximum and minimum 
rates in Germany is very large, and there is absolutely no hope of 
competing with any country that enjoys the minimum rates if the 
United States has to pay the maximum rates, because it is hardly 
conceivable that the wants of Germany cannot be entirely filled by 
any country enjoying the minimum rates. We would certainly be 
excluded by such cheaper grain, and the lack of a large customer 
like Germany would tend to depress values in America. To bring 
clearly to view the disadvantage under which the United States 
would be forced to do business under the tariff noted above, we 
give here the figures of that law as applied to grain. In the table 
the first column gives the general or autonomous tariff rate — the 
one which would be enforced against United States products — and 
the second column the rates enforced against the products of those 



Duties on Grain Imported into Germany Under the Tariff of 
March 1, 1906. 



Duties per ioo kilos (220.46 lbs.)- 



Rye 

Wheat .... 
Barley . . . 
Malt barley 

Oats 

Buckwheat 
Corn 



Autonomous 
or General. 



Marks. Dollars 



7.00 

7-5° 
7.00 
7.00 
7.00 
5.00 
5.00 



(533) 



1.67 
1.78 
1 .67 
1.67 
1.67 
1. 19 
1. 19 



Treaty 



Marks. Dollars, 



5.00 
5-5° 



4.00 
5.00 



3.00 



1. 19 
I-3I 



•95 
1. 19 



7^ 



Former 
Tariff. 



Marks. Dollars. 



3-5° 

3-50 
2.00 
3.60 
2.80 
2.00 
1.60 



•83* 

•S3* 

.48 
.86 

•67 
.48 
■3^ 



94 The Annals of the American Academy 

countries with which Germany has commercial treaties. At the 
right we give the rate formerly paid under the old German tariff. 

This table is eloquent of the disadvantage under which the 
United States exporter would have to work due to the lack of 
reciprocity arrangements. When the barley and buckwheat of other 
countries can reach the German market free of duty, it is, of course, 
impossible for the American products to stand the competition when 
they are subject to the duty of $1.67 and $1.19 per 220 pounds, 
respectively. The discrimination amounts to a prohibition of import. 
Though the difference in rate is not so great in the other grains, it 
is practically of the same effect. When our rye, corn and wheat 
must pay approximately thirteen cents and our oats approximately 
six cents per bushel more for entry into German ports than is paid 
by Swedish, Austrian and Russian grain of like character, the Ger- 
man ports may be counted out of existence as far as the American 
grain trade is concerned. 

'The destruction of the American grain export to Germany was 
fortunately averted for the time being by an agreement entered into 
just two days before this obnoxious tariff was to go into effect. By 
the act of February 26, 1906, Germany granted to the United States 
until June 30, 1907, the tariff privileges which were accorded by 
reciprocity treaties to Austria-Hungary, Belgium, Italy, Roumania, 
Russia, Servia, Switzerland and Sweden, among the countries of 
Europe. It will be noticed that this list includes all the important 
grain-producing countries of the continent. Similar reciprocity 
arrangements were in force with Australia and the Argentine. It 
thus becomes clear that had Germany not been willing to grant us 
the favor of treatment on the same terms as countries with which 
she had reciprocity treaties, we would have been shut out of her 
grain market to the advantage of all the other grain-producing 
nations of the world. And there are good reasons to believe that 
unless we are willing to make substantial concessions Germany will 
refuse to extend the agreement beyond the present limits. 

This is the situation of our grain trade with Germany to-day. 
We are "tenants at will" in the privilege of being treated as other 
nations are. Other nations have secured the advantages they 
enjoy through an intelligent presentation of mutual concessions. 
Our own stiff-backed policy has carried us into a position where 
our obstinacy may be the cause of doing us substantial damage, the 

(534) 



Tariff in its Relation to Grain Trade 95 

results of which may be hard to repair. Let us glance for a moment 
at the list of our confreres in this pennywise policy of not coming 
to a reasonable trade agreement with the German Empire. In the 
list we find among European countries only Montenegro and Por- 
tugal. Among American countries we join hands in this respect 
with Peru, Venezuela and Hayti. Mexico, the Argentine and even 
our Central American neighbors, though their foreign trade is 
insignificant in comparison to our own, have been more active and 
possess tariff treaties securing advantages similar to those Germany 
stands ready to offer to us. 

This dispute with Germany presents our problem in an acute 
form, it is a case in which a solution must be arrived at before July 
1 of the present year if the American exporter is to enjoy a German 
market. Fortunately, the chances of success in making some ar- 
rangement are good at the present writing. A broad reciprocal 
arrangement will, we trust, be worked out. Such would be in the 
interests of both countries and would be an advantage in the United 
States in a very real way to the widespread grain interests of the 
West, to the grain trade, technically speaking, to the transportation 
interests ; in short, to every person whose well being is connected 
with the prosperity of the classes producing agricultural foodstuffs. 

I have endeavored to show of how great an importance such a 
reciprocity treaty would be to the grain trade of this country. I fail 
to see how anything else but the enmity of those who enjoy the 
unnatural protection of our high tariff could frustrate any arrange- 
ment that is so manifestly necessary to keep the wheels of commerce 
moving and of such wide importance to the population of the United 
States. Every farmer producing and every merchant dealing in 
grain east and west of the Mississippi River, north and south of the 
Mason and Dixon Line, will have to suffer if the selfish manufac- 
turers of the North succeed in keeping the doors closed to importa- 
tions of German goods and frustrate thereby amicable arrangements 
which will lead to a reasonable basis of reciprocity. 

We have considered but one branch of the advantages to be 
gained by reciprocity treaties, the grain trade, and the effect of such 
an agreement in a single country — Germany. The illustration is, 
however, not an isolated one. The way a rigid tariff affects the 
grain trade is symptomatic of its effects on the live stock market, 
and even on many of the very branches of manufacture whose 

(535) 



96 The Annals of the American Academy 

welfare is the chief reason for the existence of a tariff. The time 
has come when we must realize that not everything can be sacrificed 
in our commercial policy to a single set of interests, however im- 
portant those interests may be. Protection to one group of indus- 
tries may, if too strictly applied, result in oppression of another 
group through legislative action abroad amounting to restriction of 
markets. The tariff was originated to create a market for home 
manufactures, and it was successful in its object, but it must not 
be allowed to now restrict our markets for other home products 
which have quite as good a claim upon national protection. There 
must be a balancing of accounts. 



THE TARIFF AND OUR FOREIGN TRADE IN MEATS 



By J. Ogden Armour, 
President Armour & Company, Chicago. 



The vital effect of our foreign commercial policy upon the 
packing industry may be readily understood when we consider that 
the value of our exports of packing-house products amounted in 
1906 to nearly two hundred and eight millions of dollars. Cotton 
is the only article the exports of which exceeded this value, and 
Europe is obliged to take our cotton ; her people cannot do with- 
out it. 

On the contrary, the export business in packing-house products 
has been built up in the face of hostile legislation in every country 
of the world save one. Whenever our tariff has been raised for 
the benefit of our manufactures, continental Europe has retaliated 
by some form of restrictive measure. 

Serious discriminations in rates of duty in favor of other meat- 
producing nations, so-called sanitary measures designed to exclude 
rather than regulate, steady and thoroughly organized press cam- 
paigns against the purity and healthfulness of our herds and 
products are just a few of the difficulties the packing industry has 
had to contend with in its endeavor to extend our markets into 
every corner of the world. Unfortunately, ill advised and unwar- 
ranted attacks by Americans upon one of the greatest American 
industries have given new life and strength to these attacks abroad 
Much of the ground already gained has been lost and our work 
must be done over again. 

There are more people financially interested in exports of meats 
than in any other industry in the United States. The production 
of meat food animals is diffused over almost the entire country, and 
is distinctively a national industry. The last census (1905) shows 
that there were nearly 1,000 slaughtering and meat-packing estab- 
lishments whose total output was well over nine hundred millions 
of dollars. 

It is an economic fact, too well known to require argument, 
that the market for the surplus of any commodity governs the price 

(537) 



98 The Annals of the American Academy 

of the entire production. It is equally true that broader markets 
mean higher prices and greater facility of sale. Nowhere is this 
more clearly demonstrated than in the packing industry. The 
export business in cattle and meats and meat products is the safety 
valve of the stock-raising and meat-producing industry. It takes 
care of the surplus from the farms and it provides a market for 
grades of cattle and beef that would find but a limited market or 
none at all in this country. It thus preserves the balance between 
production and consumption, giving the American stock grower a 
fair price for his product, and giving the American consumer the 
kind of meat he wants at a fair price. 

A great deal of credit is due to the modern packing house for 
its development of the export trade in meats. In i860, before the 
modern regime began in the meat industry, our exports of beef and 
pork to the Old World amounted to less than eight million dollar*. 
It was not until progressive houses organized the trade and per- 
fected methods of curing and packing that meats were shipped to 
Europe and around the world for household consumption. The 
packer has been a good commercial agent for the farmer and cattle 
raiser. He has won the patronage of the world against the greatest 
odds by furnishing meat products of the finest quality, overcoming 
the difficulties of transporting perishable products great distances, 
and by establishing direct agencies in every market of the world 
to look after the business. 

It would seem that we have accomplished much ; but, large as 
this export business is, it could be made much larger, with corre- 
sponding increase in profits to live stock raisers, by a little consistent 
and co-operative effort. 

Great Britain is now our best customer. Her markets absorb 
nearly sixty-five per cent of our total exports. But Great Britain 
is an outlet for the better grades of live stock, leaving us to find a 
market elsewhere for the commoner qualities. Continental Europe 
ought to — and would under proper cultivation — furnish a vast outlet 
for the classes of meats for which there is least demand in America 
and Great Britain. The masses of the people of continental Europe 
are practically without meat at all times ; they cannot afford to buy 
it. Horse meat is a recognized article of commerce. The European 
would be delighted with cuts that our people pass by. Instead of 
the steaks and roasts which we demand they would be pleased with 

(538) 



Tariff and oar Foreign Trade in Meats 99 

boiling cuts and corned beef. As for other meat products, hams, 
bacon, sausage, etc., a market for literally millions of American corn- 
fed hogs would be provided in Germany, France and other conti- 
nental European countries, if our meats were treated fairly as to 
tariffs, sanitary regulations and information to the public. 

We find in Germany a concrete example of the way hostile 
foreign legislation operates against increase in our exports of meats 
and meat products. In 1904 (the last year for which I have official 
figures) Germany imported 321,879 cattle, worth nearly $27,000,000, 
mostly from Austria-Hungary, Denmark and Switzerland. During 
the same year we sold Great Britain 401,245 cattle, worth nearly 
$35,000,000. In the same year Germany imported packing house 
products to a total value of $43,472,200, of which we supplied 
$25,206,000. Great Britain imported $223,171,623, of which we 
supplied directly and through the Netherlands (who take our oleo 
oil and manufacture it into margarine for the English market) over 
$105,000,000. 

Given a fair opportunity, there is no reason why we should 
not be able to sell Germany a large proportion of the cattle she 
imports annually. But better still from an economic American 
standpoint we should, with a fair adjustment of our tariff relations, 
be able to sell her immense quantities of pickled and canned meats. 
Her people would be glad to get them — if given a chance. 

When Germany prohibited the import of American canned 
meats at the close of 1900, her annual imports represented one hun- 
dred thousand cattle a year, about two thousand head a week. A 
most important fact to be remembered is that the German market 
would absorb the grade denominated "Range Cattle," for which 
there is but a limited demand at home and in England, and even 
then only for the ribs and loins, the "roast" and "steak" producing 
cuts of the carcass. There might be a great increase in the exports 
of meats with a corresponding gain in the income of the farmer 
without any advance in prices of the popular cuts used at home. 

We do not need any foreign market for lean breakfast bacon 
or beef loins, as we have hard work to supply the home demand. 
These cuts bring high prices in retail markets, but the packer and 
the farmer get little benefit. The farmer must sell and the packer 
must buy upon the average price of the entire carcass. The shoul- 
ders, chucks, plates and rounds are just as wholesome and nutritious 

(539) 



ioo The Annals of the American Academy 

as the finer parts, but they require more care and art in cooking. 
Our people are so prosperous that they can afford to buy the higher 
priced cuts, and unfortunately hold the mistaken notion that the 
cheaper cuts are inferior. In England the popular taste is veri- 
similar to that of the United States, so that the English market 
affords no outlet for the cuts rejected by the American housewives. 
We are all more or less familiar with the culinary art of France 
and Germany. Their gooks know how to prepare appetizing and 
wholesome dishes from the cheaper cuts of beef, and to dress these 
dishes with the fat bacon which our people will not use. 

The reasons given by the nations of continental Europe for 
their exclusion of our live stock have been proved and are acknowl- 
edged by the most eminent scientists to be unfounded. American 
cattle and hogs are the healthiest in the world — the fact is un- 
questionable. American meat food products are the purest and 
cleanest in the world. If there were isolated cases of carelessness 
in the past, there cannot be in the future under the strict regula- 
tions of the Meat Inspection Act. 

Conceding these incontrovertible facts, what then is the reason 
that our farmers, live stock raisers and packers are unable to extend 
their markets abroad — not only in continental Europe, but in South 
America, South Africa and Asia? Because the United States is 
the only modern nation without a clearly defined ''Foreign Com- 
mercial Policy." We have been bending all our efforts and energies 
to the building up of our manufactures, we have assisted them by 
our tariff, and they have succeeded beyond any dreams of prophecy. 
But while we have been doing this the farmer and the live stock 
raiser have not been considered. It is time that w r e faced this ques- 
tion and faced it practically, that tariff schedules, which have been 
outgrown, be analyzed and used to open the doors of foreign nations 
to our meat products. 

In all other progressive countries the government energetically 
promotes export markets for everything which their people can sell 
at a profit. Shall the United States fall behind? The prosperity 
of the farmer is the prosperity of our nation. In no other country 
of the world is this so true ; therefore he should receive more con- 
sideration from our legislators than elsewhere. Our executive offi- 
cers should be empowered to use the outgrown schedules to make 
contracts which will open these markets to us. The tariff after all 

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Tariff and our Foreign Trade in Meats 101 



is a question of business rather than politics, and as such it should 
be treated. 

Ten years ago President McKinley, who all his life had been 
a close and practical student of tariff questions, saw fiat the time 
had come for a change — for the adoption of a "Foreign Commercial 
Policy" which would put us in the broad position of a nation that 
seeks to promote friendly relations and commerce with every coun- 
try. There is no doubt in my mind that in the near future the 
American people will discover the wisdom and importance of this 
policy. 



THE TARIFF AND OUR FOREIGN TRADE IN 
ELECTRICAL APPARATUS 



By Maurice Coster, 

Manager Export Department, Westinghouse Electrical and Manufacturing 
Company, New York City. 



There are so many factors entering into the problem of the 
development of our foreign trade that the student is apt to be 
confused and discouraged by the complexity, and conclude that 
attempts at analysis are useless. Continued investigation, however, 
will prove that the main determinants are comparatively few in 
number. Some of them involve the people of the country, some have 
to do only with the country's resources or the facilities for rendering 
those resources available. Some are under the control of the gov- 
ernments, some act independently of them. Let us review these 
elements, keeping in mind their especial relation to our position in 
the United States : 

The chief factors affecting the peoples of the countries trading 
with each other are, the friendly spirit of co-operation and peaceful 
rivalry, community of racial stock, and the large international use 
of capital, the flow of resources from one part of the world where 
there is abundance of capital to another where it is needed for the 
development of industrial opportunities. 

In the possession of all these elements, which help to form a 
basis for the development of foreign trade, the United States is 
endowed far beyond any other of the present-day nations of the 
globe. Our whole history since our independence has been bound 
up with our ambition to win our way among the nations — to develop 
our peculiar national interests and make of ourselves the foremost 
example of what democracy stands for. Our whole fiscal policy 
has been dominated by the desire to make the American able to com- 
pete on equal terms with the citizens of other countries — to over- 
come any economic handicap under which we might be working due 
to the undeveloped condition of our resources or due to the different 
standards of life obtaining in the various commercial nations. 

America again stands pre-eminent in possessing the most cos- 

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Tariff and Electrical Apparatus 103 

mopolitan population of any country on the face of the globe. Every 
important commercial nation of the world has contributed numbers 
of its sons to the upbuilding of the great American commonwealth. 
This fact binds us more closely to the other nations, not only in an 
ethnic way, but through community of interests and ideals. These 
foreign contingents within our borders are a potent influence to 
make our political relations peaceful and to encourage the formation 
of close commercial ties between their mother countries and that of 
their adoption. The most powerful influence of this sort in our 
own public life is, of course, our relation to Great Britain, bound 
as we are to her through our history, through our common origin 
and our common tongue. These factors alone, independent of our 
economic interests, would furnish a powerful incentive predisposing 
the two great branches of the Anglo-Saxon race to the cultivation of 
commercial relations. Though in a less degree our connection with 
other nations, and our community of interests due to that connec- 
tion, are just as clearly demonstrable. Our relations to the German 
nations are rendered friendly not only by the close connection of 
the Anglo-Saxon w T ith all Teutons by race, but because we have 
within our borders literally millions of German citizens who have 
come to America to make it their home. Since 1820 there have 
come to the United States from Germany over 5,000,000 immi- 
grants, and the number of native Germans at present residing in 
the United States is nearly 3,000,000. These, with their descen- 
dants, clinging to the customs, and to some extent the language of 
their fatherland, are a silent but potent factor in working for the 
maintenance of amity between Germany and the United States. 
The lesser countries are bound to us in a similar way. Holland, 
with 100,000 native Dutchmen living in the United States ; Scandi- 
navia, with 1,000,000, and Italy, with an American "colony" of 
500,000 in 1900, are all bound to us in thought and in economic 
interests by this joint ownership of population. 

How close a connection there is indeed between our foreign 
immigration and our foreign trade may be illustrated by the fact 
that our foreign trade in the case of Italy has expanded from about 
$40,000,000 in 1896 to nearly $90,000,000 for 1906, an increase 
coming at the same time as a remarkably rapid growth in the immi- 
grant Italian population. Similarly our Russian immigrant popula- 
tion in 1900 was nearly half a million. Since then, due to the 

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104 The Annals of the American Academy 

internal troubles of the home country, that number has been greatly 
increased. Contemporaneously the values of our exports and im- 
ports in trade with that nation have grown. During the last decade 
our export trade to Russia has more than doubled, and the value 
of our imports has more than quadrupled. 

These examples must suffice. They serve to illustrate the fact 
that community of race carries with it community of commercial 
interests. If this be so, here again the United States <has a 
better basis for the development of her foreign commerce than any 
other country of the world. 

Hardly less marked is our advantage as regards the third factor 
— the use of foreign capital in the United States and the use of 
United States capital abroad. Naturally, the latter is more notice- 
able in the undeveloped countries, especially Spanish-America, than 
in those countries of Europe where capital is already abundant and 
where the industrial opportunities do not offer such large returns. 
The investments of American capital in Mexico are now estimated 
at almost $800,000,000 American gold. Our consul general in Cuba 
estimates the American capital in that country between $100,000,000 
and $200,000,000, while in Porto Rico American capital finances 
practically the whole industrial organization of the territory. In 
the great countries of Europe local capital has generally been em- 
ployed, but in many great interests it is American inventions and 
American skill in manufacture and management which have fur- 
nished the basis for the development of great industrial establish- 
ments. There is no room for doubt that the presence in the countries 
abroad of American industries and capital and the presence in 
America of even greater amounts of foreign capital, have operated 
to strengthen the commercial relations between the different com- 
munities. 

In all three of these ways, friendly spirit, close racial con- 
nections and the international use of capital, the United States stands 
then, in an exceptional position. To an extent equaled by few, if 
any, of the nations of the world, our position gives us the right to 
count on these factors to aid us in the development of our foreign 
commerce, 

The second general consideration, determining to what extent 
any given nation may hope to develop foreign trade, is its resources, 
including not only what substances it can produce for market 

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Tariff and Electrical Apparaus 105 

abroad, but the facilities supplied for transportation of the products 
within the country itself and the industrious character of its popu- 
lation. 

On this subject little need be said, not because it lacks in 
importance, but because the character of the resources of the United 
States is so well known. Of material resources we have such 
wealth that we have become the world's greatest producers of all 
the important articles used in manufacture, such as cotton, iron, 
copper, timber, coal and foodstuffs. We have the greatest system 
of railways to be found in any country in the world with which to 
carry the manufactured products or raw materials to whatever 
border may claim them for beginning their voyage to foreign mar- 
kets. The ability of the American workman also needs no eulogy. 
In all the elements of this second class of qualifications for foreign 
commerce the United States stands well equipped. 

We now turn to a third class — one in which the government 
may do much to aid the development of foreign trade or by neglect 
of action may allow great harm to be done. There are two chief 
factors involved here, both of which are engaging the attention 
of the American people to-day. These are the merchant marine 
and the tariff. 

It may be well before taking up these topics in particular to 
say a word in recognition of what the government is already doing 
in the creation of conditions favorably for foreign commerce. It 
has aided foreign commerce by maintaining a great statistical de- 
partment — the Department of Commerce and Labor, it records the 
trade movements to and from the United States and other com- 
mercial countries of the world, it sends consuls abroad to report 
upon the markets existing there for American goods and to protect, 
as far as possible, our as yet too undeveloped commercial interests 
abroad ; but all this is not enough. Our government has not taken 
the steps which more than all else would enable us to compete on 
an equal basis with other nations for the commerce of the world. 
It has not eliminated disadvantages under which our merchant 
marine must work, and therefore we cannot reach the foreign 
markets on such terms as we must to compete with our rivals. 
Secondly, our government has not overcome adverse fiscal legislation 
in the countries abroad, legislation which places us at a disadvantage 



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106 The Annals of the American Academy 

because of high tariff duties, from which other nations, because of 
special arrangements, are exempt. 

These are business questions much more than true political 
questions — a fact our representatives in Congress have not clearly 
realized up to the present time. These problems of the expan- 
sion of our export trade in manufactured products should be taken 
out of the field of partisan politics and decided on their merits as 
the true economic questions which they are. From this viewpoint 
then — as a practical business man connected with large manufac- 
turing interests, I approach the question of what ought to be done 
by this country to expand its export trade. 

In my mind, the very first thing to be done is to get better 
steamship communication between this country and foreign lands, 
especially South America and the Orient. These are the regions in 
which the greatest economic development of the next generation 
is bound to come, and once any nation has gained exclusive or 
preponderant control of the routes of trade leading to them, it will 
be hard for any subsequent competitor to dislodge her from that 
position. Our commerce with the Orient has only begun, when 
we consider the development it should have due to our advantageous 
geographical position. Our trade with South America also is as 
yet in its infancy. It is the duty of our government to see that its 
growth be not checked, but that it be given every opportunity to 
develop as it should. In spite of our apparent advantage in South 
American commerce, furnishing as we do the chief market for the 
greatest South American product, coffee, and an important outlet 
for others of her exports, American commercial relations with the 
countries of that continent have languished. To illustrate this, I 
may say that it frequently takes longer to send a letter to Brazil 
direct than it does to send it via England. Such disadvantages in 
trade as this shows operate to exclude us from a market which 
under all normal conditions should be ours. That the government 
should help to assure us the preponderance in South American trade 
that our position would justify seems almost axiomatic. 

If Congress is not in favor of ship subsidies, it ought at least 
to encourage American shipping by permitting Americans to go 
into the open market and purchase their ships abroad, in order to 
allow them to compete with other countries. In other words, treat 
ships like merchandise. To the business man the method by which 

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Tariff and Electrical Apparatus 107 

our access to the markets of the south is gained is of relative 
unimportance. That access should be gotten is clear, and as the 
industrial development of South America takes .place it will become 
increasingly important. 

Heretofore our foreign competitors in the field now especially 
under consideration, Spanish-America and the Orient, have had the 
advantage of American exporters, because they have been willing 
to accept terms of payment extending over a long period of time, 
while, as a rule, American manufacturers insist on full payment 
before the goods leave the country. Until money becomes cheaper 
in this country it will be difficult for us to compete with Europeans 
in this respect. There are, however, certain lines of goods in which 
a profitable permanent foreign trade may be built up in spite of this 
disadvantage under which, for the present at least, we must be 
content to labor. 

The second modification of our present commercial system 
which is essential for the development of our foreign trade is the 
modification of our present tariff. Sufficient attention has not been 
paid to the maximum and minimum tariff placed on our goods by 
foreign countries. It was in order to overcome the onerous maxi- 
mum tariff that President McKinley recommended reciprocity trea- 
ties. At present in countries like France and Germany American 
goods pay sometimes fifty per cent more duty than goods coming 
from other countries, simply because the Americans do not extend 
reciprocal favors. The policy of Mr. McKinley was to expand our 
trade through the exchange of such favors on a reciprocal basis as 
would allow us to dispose of surplus in certain lines without injury 
to American manufacturing industries. Now that the treaties 
which Mr. McKinley negotiated have failed, we ought not to be 
surprised that leading foreign nations have put in effect their 
maximum tariffs against many of our goods. They look upon the 
situation as one-sided, and they naturally are bound to favor other 
nations which are willing to exchange with them on a reciprocal 
basis and with whom they have treaties guaranteeing such favored 
treatment. 

The manufacturer in this country well knows that he cannot 
expect to build up a trade in a community which he openly offends 
by his daily action. He well knows that there are many cases where 
he may have a legal right to follow a certain course of action, but 

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io8 The Annals of the American Academy 

where to do so would, in fact, do an injustice to the second party, 
and would, in the long run, bring great harm to his own prosperity 
by turning the individual offended against him. The same is true 
in international affairs. The United States stands much in the 
position of the obstinate merchant. We have the undoubted right, 
barring treaty agreements, to enforce against foreign countries a 
tariff as arbitrary as we may please. Our position may be such 
that on certain lines we may be able to force the hands of other 
countries, but such action can but bring us the ill will of the country 
against which we adopt our arbitrary attitude. Such countries will 
inevitably prefer to turn, whenever possible, to other nations willing 
to settle their trade relations on the basis of mutual concession 
rather than to the one which uses its economic advantages to mulct 
those dependent upon it. Thus the immediate advantage may ulti- 
mately cause serious loss of trade. The position of the United 
States when insisting upon its "no compromise" tariff is just this. 
It is my opinion that the United States must come, sooner or later, 
to the adoption of some form of tariff approaching the maximum- 
minimum plan now in general use in continental Europe. A single 
basis tariff was eminently right ten or fifteen years ago, when 
nations generally used that method of levying duties, but we have 
passed from a world of single basis tariffs to one which is now 
largely a world of maximum-minimum tariffs. Disregarding the 
general development, we have clung to our old-fashioned tariff 
instrument, and are thus left with very little opportunity to return 
good treatment from other countries, and almost no opportunity to 
defend ourselves against bad treatment by them. 

Under our present tariff arrangements every country in the 
world knows that it can put up its tariff against our imports, dis- 
criminating against them as compared to the same products from 
other countries, and yet it will suffer absolutely no disadvantage 
from such action. Every country knows, further, that if it grants 
to the United States especial favors in its tariff arrangements it 
can expect no benefit from such action, because we have but a single 
tariff rate and must charge that country which favors us just as 
high a rate as the one which discriminates against us by arbitrarily 
high rates of duty. The result is that, on the one hand, we are 
helpless against unfriendly legislation and, on the other, unable to 
return friendly tariff provisions. 

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Tariff and Electrical Apparatus 109 

What advantages we would reap from a modern tariff system 
are perhaps best shown by considering the disadvantages under 
which we now labor. There are certain classes of goods, like agri- 
cultural implements, which can be manufactured much cheaper in 
this country than anywhere else in the world on account of the 
great quantities turned out, which are exported even now for cash, 
simply because they can be sold at a lower price by us than by 
Europeans, and the purchaser has a chance to resell at a profit on 
account of the low original cost. In such trade as this, if favorable 
conditions were established for foreign trade, our natural advan- 
tages would be such that we could in a short time assume the lead- 
ing role. At present, however, the European countries levy high 
duties against such goods, which materially restrict the field in which 
they might be sold. 

The handicap under which the American exporter works I 
can present most clearly by showing the effect of foreign tariff 
legislation upon the trade in electrical apparatus — the branch of 
export trade with which I am most familiar. 

Before the Europeans had learned to manufacture tramway 
motors there was a great outlet for this class of apparatus in Euro- 
pean markets. The time has come, however, when it is difficult to 
compete with the French, Germans and Austrians for electrical 
apparatus to be used in their own countries. This is due to 
two causes. In the first place, in these continental countries, the 
population is so dense and the standard of life so much lower 
than in America that the labor cost in producing apparatus is 
necessarily lower than in the United States. This fact, however, 
would not of itself overbalance the advantages we have in other 
lines — notably superior skill. Added to this, we have the dis- 
crimination of the foreign tariff, which our government has as 
yet made no effort to break down or modify. This has been 
so adjusted as to gradually encroach on our trade in many coun- 
tries, in some instances practically bringing our exclusion. In 
Great Britain, which is a free trade country, the Americans stand 
a better chance, but even there it is very difficult to compete 
with the Germans, who have made such a special study of the export 
business. They have formed certain pools, consisting of the leading- 
manufacturers, who maintain a certain price for home consumption 
and a much lower price for export business. 

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no The Annals of the American Academy 

To give you an illustration of the way Germans conduct their 
export business, I may state that while I was in France, about 
four years ago, I knew of the purchase from the Germans of sheet 
steel for the manufacture of electrical apparatus at a price delivered 
in France, duty and freight paid, which was much lower than the 
Germans could buy the same sheet steel for in Germany. The duty 
on this sheet steel in France was not less than ten or fifteen francs 
per ioo kilos. Against these methods for encouraging export it is, 
of course, hard for the average American manufacturer to compete. 

A word may be inserted here concerning the justice of adopting 
such methods of competition — the fixing of one price for the home 
market and another for export trade. The cry is sometimes 
raised that it is unfair to sell for less money abroad than at 
home. This complaint is really without good foundation. Any 
goods which are manufactured for export do not interfere with 
home competition. By being able to export a certain quantity 
of manufactured products in times of business depression, the 
fixed general expenses of manufacturers are greatly reduced, and 
permit a reduction of prices for home consumption. The export 
business should be looked upon by American manufacturers, as long 
as we are as prosperous as we are now, and as long as the demand 
exceeds the supply, as a kind of a friction load to be used to raise 
the low points of the "sine" curve, representing the ups and downs 
of business activity. Although some seeming sacrifices have to be 
made in good times, these sacrifices will be more than made up in 
bad times, and the home consumer will profit in the periods of 
stringency because of the export business. 

Owing to the cheap European labor and the adverse tariff regu- 
lations a once flourishing market for American electrical apparatus 
has disappeared, in spite of other very obvious advantages in manu- 
facture present in the United States. Due to this fact, our best 
market has now been transferred to some of the less developed 
countries. Our greatest demands for manufactured electrical appa- 
ratus now come from Mexico, Japan, Brazil and the west coast of 
South America. The great predominance of British interests in 
the Argentine is the reason why there is not so much demand in 
that country for electrical apparatus of American manufacture as 
there is for that of British make. 

That American manufacturers should be thus excluded from 

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Tariff and Electrical Apparatus in 

the market of the most important European countries means, of 
course, a direct loss to American labor as well as to American 
capital. It may be instructive to note in this connection what has 
been the outcome in European countries which have adopted the 
policy of mutual concession in determining their trade relations. 
It need hardly be said that this policy has had the effect of stimu- 
lating trade among themselves as against American goods. 

If we should take France, for instance, which applies its mini- 
mum tariff to Germany, Switzerland, Great Britain and other coun- 
tries, we would find that it is almost impossible to compete with 
these countries on an equal footing, because we are taxed with the 
maximum tariff, and in consequence the export trade of the coun- 
tries mentioned above with France is greatly stimulated, and we 
suffer to a corresponding extent. Could we be freed from this dis- 
crimination through the agency of a tariff agreement which would 
put us in, say the French market, on the same basis as Germany 
and Switzerland, our export trade would again be able to seek the 
European market with greater success than at present, even if, on 
account of local competition, it should prove impossible to attain 
our former preponderance. 

I have shown that the United States possesses a basis for the 
development of foreign trade present in few, if any, of the other 
nations of the world. In view of the fact that if normal grounds of 
competition were established a great increase in our foreign trade 
would ensue, it seems to me that the establishment of such condi- 
tions is a problem that should engage the attention of every person 
interested in the continued prosperity of our nation. These are, let 
me repeat, business questions, and should be viewed and decided 
from the business standpoint. We cannot afford to neglect so im- 
portant a factor in our national prosperity as the development of 
our foreign trade. In my judgment, as a practical man, and not as 
a theorist, we ought to make in this country a careful study of all 
our trade relations with the nations with whom we deal, or in which 
we hope some time to get a market, to the end that the constantly 
changing tariff conditions among them may be met by such changes 
on our part as shall allow reciprocal relations of some sort to 
operate to the advantage of all parties. 

If it were possible for the House of Representatives and the 
United States Senate to appoint committees consisting of such able 

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ii2 The Annals of the American Academy 

men as Secretary Root, and to send these committees on a tour of 
inspection and personal observation to the various countries, I am 
sure that any expense connected with such trips would be fully 
repaid by the benefits which would follow. A clearer understand- 
ing of our needs would be arrived at and tariff changes would 
be urged and adopted and an increased export trade would be 
the result. The trouble with our Congress is that there are very 
few men who understand foreign conditions as well as does Secre- 
tary Root. 

Let me illustrate the advantages that would arise from such 
a sane study of tariff questions as I have suggested by the experi- 
ence of one of our greatest commercial rivals. Germany, before 
she adopted her new tariff, studied the whole foreign trade sit- 
uation very carefully by a most competent commission. She 
examined her local manufacturers as to cost of production, and 
as to what they could do in foreign markets if certain arrange- 
ments could be made. She sent emissaries to different parts 
of the world, particularly to our own country, where they made 
most careful observations of manufacture, shipment, collection, 
etc., to see how they might themselves benefit by a study of 
our excellent methods, not only in getting their goods into the 
United States, but in competition with us in other parts of the 
world where we have to put our surplus. Having thus fortified 
themselves with a fund of information on the subject, the represen- 
tatives of the German Government were able to proceed intelligently 
to the formulation of an efficient tariff measure, such as the one 
now in force in the empire. The result of this careful study of 
foreign business preceding the enactment of her tariff is that to- 
day Germany is our chief competitor, and the one that is most to be 
feared. 

We might well profit by this example. It would be of great 
advantage to us if we adopted some of Germany's thoroughness in 
the study of so important a subject which has a bearing upon every 
manufacturer who produces a surplus, or who will produce a surplus 
if home consumption declines. 



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THE LEATHER INDUSTRY AND THE TARIFF 



By A. Augustus Healy, 
Vice-President United States Leather Company, New York City. 



The leather industry is one of the industries of the United 
States that are victims, not beneficiaries, of the tariff. Shoe manu- 
facturing is another. Agriculture, conspicuously, is a third. There 
are others. 

Partly because of the abundance in our country of oak and 
hemlock bark and other tanning material, partly because of the 
enterprise and skill of our people, American tanners have been able, 
not only completely to hold their home market, but to export 
increasing quantities of leather to Europe. This they have suc- 
ceeded in doing notwithstanding the handicap imposed upon them 
by the tariff — a handicap now more serious than ever. 

The leather industry has never asked for governmental favor. 
It has never demanded that the people of the United States be 
taxed for its benefit, but itself has been taxed and is now taxed by 
the tariff for the benefit of other and more favored industries. It 
has paid higher prices because of the tariff for its steel and copper, 
for building material, for machinery and tools, for oils and other 
minor articles used in manufacture. It has paid these taxes and 
all engaged in the industry have paid an increased cost of living by 
reason of the tariff without getting the slightest benefit in return. 
Added to this, our market abroad is diminished by the high tariff 
on foreign imports, which prevents other countries from sending 
here commodities in return for which they would take increased 
quantities of our leather and also increased quantities of our boots 
and shoes. 

Notwithstanding the double detriment to our industry worked 
by the tariff, until a decade ago no protest or complaint had gone 
up from leather manufacturers. The protective system in an ex- 
treme form, had been adopted by the government and was accepted 
by them as part of the established order of things. The injustice 
and injury to their particular business was borne in silence. But 
when, in 1897, it was proposed in the Dingley tariff to assail us 

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ii4 The Annals of the American Academy 

with a duty on hides, the raw material of our industry, the leather 
people thought that it was time to protest. A delegation went to 
Washington and appeared before the ways and means committee 
to remonstrate against the imposition of this duty. They told how, 
not only the manufacture of leather, but cattle raising, had ex- 
panded and reached to foreign markets during a quarter of a 
century of free hides. They showed that the United States pro- 
duced and could produce only about two-thirds of the number of 
hides required by our tanners, necessitating large imports of them ; 
that we should be at a great disadvantage in the hide markets of 
the world in competing with Canada and European nations, none 
of which imposed a duty on hides ; that our growing export trade 
in shoes would be handicapped by the enhanced cost of leather. 
They pointed out that hides in relation to cattle were a by-product 
and farmers would get little or no benefit from the duty ; that there 
had been no request for such a duty from cattle raisers, or, indeed, 
from any source so far as had been heard, and, finally, that it would 
be most unjust to the leather and shoe industries of the country, 
which then were receiving only injury from the tariff, to impose this 
additional burden upon them. The argument at the hearing was 
one-sided, no one appearing in favor of the duty, but the committee 
turned a deaf ear to the appeal of the leather men, and the odious 
tax was imposed. At that time Senator Hanna was in control. He 
had promised that "everybody should be protected," and no person 
in opposition to a duty had any standing at Washington. 

During the decade since the imposition of the duty on hides 
it has been a constant and serious detriment to the great leather 
and shoe industries of the country, which employ so many thou- 
sands of men and so many millions of capital. The injustice and 
injury of this duty is deeply felt by all connected with the shoe and 
leather trades and is voiced at every meeting of their associations. 
A large delegation of prominent leather and shoe manufacturers 
appeared before President Roosevelt more than a year ago to invoke 
his influence with Congress in favor of its repeal, but without 
result. 

By dint of great effort and with a minimum of profit on their 
exported products, the leather and shoe manufacturers have been 
able thus far to retain their hold on foreign markets. Their trade, 
however, with European nations is not increasing, and there is 

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Leather Industry and the Tariff 115 

danger of its diminution. Through the operation of the maximum 
and minimum tariff, our exports of shoes to Germany and France 
are likely soon materially to fall off unless our government responds 
to the overtures of those nations for some form of reciprocity. We 
can produce here a better quality of both sole leather and upper 
leather at a given price than can be produced in Europe. We are 
far more skilful in the manufacture of shoes. But, as President 
McKinley said, "If we will not buy, we cannot sell." We need 
reciprocity with the countries of continental Europe, with Canada 
and the South American Republics. A more liberal policy on the 
part of our government in the establishment of trade relations with 
other countries, which should result in increased interchange of 
commodities upon a fair and friendly basis of reciprocity, would 
tend greatly to augment our exports of leather and shoes, to the 
great advantage of those industries and to the benefit of the country 
at large. 



THE TARIFF AND THE LUMBER TRADE 



By W. B. Mershon, 
Saginaw, Mich. 



In writing on the tariff as it affects our American industries 
through the importation of Canadian timber, it is hard to determine 
just where to begin. Perhaps I might begin by saying that I have 
been in the white pine lumber business here in the Saginaw Valley 
all my business life, extending over a period of thirty years, and 
for that reason should be qualified to give a more or less valuable 
expert opinion. 

Years ago Michigan was full of standing pine, and the Sagi- 
naw River was lined with saw mills from one end to the other. In 
1884 over one thousand million feet of white pine lumber was 
manufactured on the Saginaw River. Last year there was not 
over twenty-five million of white pine manufactured in the same 
district. With this vast quantity of raw material — by raw material 
I mean white pine lumber standing in our forests here years ago — 
it was natural that this valley should begin to develop the manu- 
facture of the same, and that numerous planing mills and box 
factories should start, beginning first as small affairs, but gradually 
growing until a vast industry was built up. Those interested in 
this great industry, as the pine forests began to disappear, were 
far-sighted, and with good judgment secured timber lands in Canada, 
with the idea that the Georgian Bay district, being so near and 
accessible, the logs could be towed from Georgian Bay across Lake 
Huron and up the Saginaw Bay to the Saginaw River for manu- 
facture into lumber, thus prolonging the life of the planing mills, 
box factories, sash and door factories, and other cognate industries 
for many years to come. 

Then came the American tariff, imposing a duty of two dol- 
lars a thousand on sawed lumber imported to this country from 
Canada, and, in retaliation, Canada, with good reason, said that if 
lumber cut by Canadians within Canadian borders cannot be shipped 
into the United States as rough lumber without paying a tax of 
two dollars a thousand, then the American mill owner shall not 

(556) 



The Tariff and the Lumber Trade ny 

ship or remove saw logs from Canadian territory unless the same 
be manufactured into lumber on Canadian soil, and from that time 
on all sales of Canadian timber have been made with a proviso 
that it should be manufactured within Canadian territory. 

What is the result? The forests of Michigan are gone. The 
supply of white pine that we were able to obtain from the Duluth 
district and along the shore of Lake Superior has nearly vanished, 
so that we have to go to Canada for our raw material or else go 
out of the manufacturing business. 

The box manufacturing industry alone of the Saginaw Valley 
reached tremendous importance. One company cut up over thirty 
million feet of white pine into boxes annually, and the high-water 
mark of the industry was reached in 1902, but since that time 
has been gradually declining, not because more boxes have not been 
used, not because there was not a greater demand for packing 
boxes of all descriptions, but because of the continued increase in 
cost and the growing scarcity of the raw material. During the last 
four years at least thirty per cent of the box factories of the 
Saginaw Valley have gone out of commission. Four years ago 
one company operating a box factory and a planing mill at Sagi- 
naw and Bay City handled one hundred million feet of white pine 
lumber, and ninety-five per cent of it passed through the planing 
mill, box factory or door factory, or, in other words, was sold as 
finished product and not as rough lumber. 

With the growth of the Canadian Northwest and with the 
advantage that Canada has in exporting, the Canadian handlers of 
white pine lumber are able to bid successfully for the products 
of the saw mills as against their American competitors, for the 
American manufacturer is handicapped by having to pay the two 
dollars per thousand tariff to his own government on every thou- 
sand feet of this raw material that he brings to his factory in the 
United States, wherein home labor is employed to manufacture it 
into dressed lumber, sash, doors, blinds, window frames, packing 
boxes, etc. 

In an address delivered by Charles Willis Ward, of Queens, 
Long Island, January 23, 1907, in reply to the address of welcome 
delivered by the Lieutenant Governer to the American Carnation 
Society, at Toronto, speaking of the resources of Canada, he 
said : "From the Atlantic to Lake Winnipeg, and from the northern 

(557) 



n8 The Annals of the American Academy 

boundary of Lake Superior to near the southern shore of Hudson 
Bay, are still standing countless thousands of millions of valuable 
timbered forests, and the same is true along the western borders 
of the Rocky Mountains, among the Selkirks and bordering the 
Pacific Ocean from Vancouver northward to Alaska. While I 
have no figures to support the assertion, I will risk the opinion 
that Canada has to-day ten times the area standing in original 
forests that now remain in the United States, and the day is not 
far distant when the largest proportion of the timber consumed 
in the United States must of necessity be drawn from Canadian 
forests." 

Now, as a manufacturer, as an employer of labor, and as one 
who has been in the lumber business all his life and is now engaged 
in it, as an owner of forests and timber lands and saw mills, I can- 
not see wherein the government of the United States is not making 
a great mistake in maintaining this tariff upon rough lumber, taxing 
our home industries for their raw material and offering a premium 
for the destruction of our present forest area. Canadian white pine 
will be manufactured at the mills along the Georgian Bay for many 
years to come, and American industries built up by our home product 
that is now exhausted should have free access to this, their only 
source of supply. 












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